MORGANABLE BUSINESS / MARKETS & MONEY
The US dollar climbed to its highest level in 19 months on Thursday, November 12, as investors increased their expectations of further interest rate increases by the Federal Reserve.
Akure —
The US dollar climbed to its highest level in 19 months on Thursday, November 12, as investors increased their expectations of further interest rate increases by the Federal Reserve.
Stronger-than-expected inflation data for October and firm comments from US central bank officials supported the currency. As a result, traders moved towards the dollar while several major currencies weakened.
Reuters reported that the dollar index, which measures the US currency against a basket of six major currencies, rose 0.11 per cent to 102.98.
The index reached its highest level since April 2025. The move reflected growing confidence that the Federal Reserve may keep monetary policy tight for longer to control persistent price increases.
The euro fell 0.08 per cent to $1.108, its weakest level since May 2025. Sterling also declined by 0.16 per cent to $1.3259.
Meanwhile, the Australian dollar slipped 0.15 per cent to $0.6836, close to a seven-month low, while the New Zealand dollar lost 0.18 per cent to $0.5552.
The dollar’s rise followed fresh evidence that inflation in the United States remains difficult to contain. Consumer prices increased by 4 per cent in October compared with the same month last year, up from 3.7 per cent in September, according to data reported on Thursday.
The increase was broader than some investors had expected, with higher costs affecting several goods and services.
The figures encouraged traders to reconsider the likely path of US interest rates. Before the latest data, some investors expected the central bank to maintain its existing policy for longer.
However, persistent inflation and stronger warnings from policymakers increased bets on another rate rise in December, followed by a possible move early next year.
RATE EXPECTATIONS SUPPORT THE DOLLAR
Several Federal Reserve officials have signalled that they remain concerned about inflation. Their comments have kept the possibility of further monetary tightening in focus.
Some officials have also indicated that the central bank may need to act more quickly if price growth does not slow as expected.
Dallas Federal Reserve President Lorie Logan supported two quarter-point rate increases and said policymakers could move more rapidly during the winter.
Federal Reserve Governor Christopher Waller said officials should consider a half-point increase if core inflation reached 0.3 per cent in October. The reported figure met that threshold.
A rate increase would make borrowing more expensive across the US economy. Higher interest rates can raise costs for households and businesses that rely on mortgages, car loans, credit cards and other forms of credit.
They can also encourage investors to hold dollar-denominated assets when returns in the United States compare favourably with those available elsewhere.
Investors therefore watched for further guidance from Federal Reserve officials, including New York Fed President John Williams, who was scheduled to speak on a panel later on Thursday.
THE YEN REMAINS UNDER PRESSURE
The Japanese yen was another major focus in currency markets. The dollar briefly reached its strongest level against the yen in more than two months before easing to 159.74 yen.
The exchange rate remained close to the important 160 level, which traders see as a possible trigger for stronger action from Japanese authorities.
The yen has faced pressure partly because US interest rates are expected to remain higher than Japanese rates. This difference can make dollar assets more attractive to investors and encourage demand for the US currency.
However, the yen recovered some ground after Japan’s top currency diplomat, Atsushi Mimura, warned that authorities could still intervene to limit sharp movements.
Bank of Japan board member Toichiro Asada also argued against raising interest rates too soon. He warned that premature tightening could weaken economic growth and reduce underlying inflation.
His comments highlighted a policy difference between the United States and Japan, where officials continue to debate the timing of further increases.
Nevertheless, the possibility of Japanese intervention remains important. A move above 160 yen per dollar could increase official concern about the speed of the currency’s decline.
Analysts said the dollar would need additional support from stronger expectations of Federal Reserve increases, or weaker expectations of Bank of Japan tightening, to push decisively higher.
GLOBAL MARKETS WATCH THE NEXT SIGNAL
Other major currencies also weakened as investors assessed the outlook for US monetary policy. The Australian and New Zealand dollars both fell against the greenback.
The euro and sterling also remained under pressure, reflecting the dollar’s broad strength and differences in expectations for interest rates across major economies.
Investors are now watching upcoming US economic releases and further comments from Federal Reserve policymakers.
Any evidence that inflation is cooling could reduce expectations for additional rate increases and limit the dollar’s advance. In contrast, continued price pressure may strengthen the case for tighter policy and support the currency.
However, a stronger dollar can create challenges for other economies. It makes imports priced in US dollars more expensive for countries whose currencies weaken, potentially adding to local inflation.
It can also increase the cost of servicing dollar-denominated debt for governments and companies that earn revenue in other currencies.
The latest rise therefore reflects more than a short-term shift in currency trading. It shows how inflation expectations and central bank decisions can influence global financial conditions.
For now, investors are focused on whether US price growth will remain strong enough to prompt further Federal Reserve action.
The dollar’s next direction will depend on incoming data and policymakers. Cooling inflation could ease pressure on other currencies, while stronger price readings may sustain expectations of higher US rates. Traders will watch economic releases and central bank signals closely each day.
