Dollar Reaches 19-Month High as Hot Inflation Fuels Bets on a December Fed Hike
The dollar index touched its highest level since April 2025 after October inflation came in hotter than expected, pushing traders to price in a near-certain Federal Reserve rate increase in December.
The U.S. dollar climbed to its highest level in about 19 months on Thursday, after stronger-than-expected inflation data pushed traders to bet on more interest-rate increases from the Federal Reserve.
The dollar index, which measures the greenback against a basket of major currencies, was flat at 102.80 after reaching 102.88 earlier in the session, its highest since April 2025, according to Reuters. Data from the Bureau of Labor Statistics showed consumer prices rose 0.4% in October from September, above the 0.3% rise economists had expected. Core prices, which leave out food and energy, rose 0.3%, also above the 0.2% forecast.
Waller opens the door to a half-point move
Fed Governor Christopher Waller said he planned to support a quarter-point increase at the Fed’s December 8-9 meeting, and that a half-point increase should be considered after core inflation came in at 0.3% in October. Money markets priced an 88% chance of a quarter-point move in December and a 12% chance of a half-point move, according to LSEG data.
Some brokerages, including Goldman Sachs, now expect a further hike early next year on top of a December move. Tiffany Wilding, an economist at PIMCO, said the risk of sticky near-term inflation argued for hikes at both the December and January meetings, with the risk of another in March.
Euro and yen under pressure
The euro was almost unchanged at $1.1085 after reaching $1.1067 in the Asian session, its lowest since May 2025. It fell about 1.3% across Tuesday and Wednesday. Kenneth Broux, a strategist at Societe Generale, said the European Central Bank would probably stop raising rates after its December meeting, which would widen the gap in favor of the U.S. dollar.
The dollar fell 0.10% to 159.62 yen after hitting 159.945, its highest in over two months. Japan’s top currency diplomat, Atsushi Mimura, warned on Thursday that it was “too early to forget” this summer’s intervention as the yen edged toward 160 to the dollar. Japan’s annual wholesale inflation sped up to 7.1% in the year to October, from 6.8% in September, a reading that strengthened views that the Bank of Japan could raise rates as soon as next month. Bank of Japan board member Toichiro Asada pushed back against calls for a near-term hike, saying in a speech that early rate increases could hurt growth.
Traders will watch New York Fed President John Williams, who is due to appear on a panel late on Thursday, for any sign of whether the Fed’s leadership backs a larger move.
Reporting based on coverage by Reuters and The Wall Street Journal.
