FOREX-Dollar rises to 19-month high as Fed hike bets grow, yen softens

The dollar climbed to a 19-month high against major peers on Thursday, supported by growing expectations of a Federal Reserve rate hike, while the yen edged toward the key 160-per-dollar level ‌following a dovish central banker's speech. Traders ramped up bets on further Fed tightening after stronger-than-expected October inflation data and a series of hawkish remarks from US central bank officials, who expressed concern over stubborn inflation and left open the possibility of a larger 50-basis-point increase.

Some major brokerages, including Goldman Sachs, now expect another hike early next year, in addition to one ‌in December. The dollar index, which measures the greenback against a basket of currencies, rose by 0.15% to 103.02, the highest since April 2025.

New York Fed President ‌John Williams is set to appear on a panel late Thursday that will be closely watched given his "pre-October FOMC meeting views the Fed had time on rate hikes," said Gavin Friend, senior markets strategist at National Australia Bank, in a note. "Fast forward two weeks and following a hotter-than-forecast October CPI report, Fed officials appear to be falling over themselves to talk up rate hikes," Friend said. "Any guidance from Williams will ⁠be seized ​on."

Against the Japanese yen, the dollar reversed ⁠an earlier decline to trade 0.04% higher at 159.83, underpinned by wide interest-rate differentials as traders increased bets on further Fed hikes. It hit a more than two-month high earlier on Thursday. Bank of Japan board member ⁠Toichiro Asada, one of two dovish policymakers who dissented from September's decision to increase borrowing costs to 1.25%, pushed back against calls within the board for a near-term interest rate hike, saying ​in a speech that premature rate hikes could hurt growth and push down underlying inflation.

Earlier a warning from Japan's top currency diplomat Atsushi Mimura that it was "too ⁠early to forget" intervention by Japanese authorities during the summer pushed the dollar/yen pair to its lowest point of the day but the respite for the yen was brief. "Once dollar/yen rises above 160, I think caution ⁠will increase ​another notch," said Sho Suzuki, market analyst at Matsui Securities.

"For it to move higher from there, the dollar would need to strengthen further, for example, through a further rise in expectations for Fed rate hikes, or a drop-off in expectations for BOJ rate hikes. Without something like that, the pair may lack enough momentum to test ⁠a break above 160," he said. Many analysts in a Reuters poll expect the next BOJ rate hike as soon as next month. That view was strengthened ⁠on Thursday by data that showed Japan's annual ⁠wholesale inflation re-accelerated to 7.1% in the year to October, up from a 6.8% annual increase in September.

The euro was up 0.06% against the US dollar at $1.1096 while sterling slipped 0.1% to $1.3266. The Australian dollar was little changed versus the greenback at $0.6847, while New ‌Zealand's kiwi was down ‌0.05% at $0.5559.

In cryptocurrencies, bitcoin fell 0.63% to $73,848.24. Ether declined 0.49% to $2,058.18.