FOREX-Dollar advances as markets price in December Fed rate hike

The dollar strengthened against major currencies on Wednesday, buoyed by growing expectations that the Federal Reserve will raise interest ‌rates after hot US inflation data and hawkish remarks from policymakers. Traders have boosted bets on a 25-basis-point Federal Reserve rate hike in December to 87% from about 70% a month ago, according to CME's FedWatch Tool, after US consumer prices rose more than expected in October for a ‌third consecutive month.

The rise in rate expectations is helping support the dollar, said Elias Haddad, global head of markets strategy ‌at Brown Brothers Harriman & Co. The dollar rose 0.69% to 159.83 against the Japanese yen, hitting its strongest in over two months and nearing the psychologically important 160-per-dollar mark.

The euro dropped 0.61% to $1.11, extending losses from the prior session and hitting its lowest since May 2025. "We've got broad-based strength in the dollar largely underpinned by a ⁠hawkish shift ​in Fed fund rates expectations driven ⁠by the hot October CPI print but amplified as well by recent comments by Fed officials," Haddad said.

Recent comments from Fed officials including Governor Christopher Waller and ⁠Dallas Fed President Lorie Logan signaled unease over high inflation and the possibility of a large 50-basis-point hike, helping to drive rate bets. The pound fell ​0.47% to $1.33 and was pinned near its lowest point in two weeks, while the dollar strengthened 0.86% to 0.832 against ⁠the Swiss franc after hitting its highest since mid-October.

The US dollar index, which measures the greenback's strength against a basket of six currencies, was last up 0.63% at 102.85, ⁠after ​hitting its highest since April 2025. Some brokerages revised their calls on future Fed monetary policy after Tuesday's data, with Goldman Sachs now expecting hikes in December and March, while Deutsche Bank expects hikes in December, January and March.

Most developed-market currencies, barring the ⁠Australian dollar and the Norwegian krone, have weakened against the dollar so far this year as a widening interest-rate gap boosted the US ⁠currency. Some analysts also attributed the ⁠dollar's strength this year to safe-haven flows amid the US-Israeli war on Iran.

The Australian dollar weakened 0.19% versus the greenback to $0.6852. Against the Norwegian krone, the dollar strengthened 0.48% to 9.54. In cryptocurrencies, bitcoin gained ‌0.16% to $73,890.48. Ether rose ‌0.85% to $2,072.40.