Dollar almost unchanged after reaching 19-month high, rate divergence in focus
TLT•The dollar was nearly flat at 102.80 after reaching 102.88, its highest level in about 19 months, as US inflation data and hawkish Fed remarks lifted expectations for rate increases. The euro was almost unchanged at $1.1085, while the yen gained 0.10% to 159.62 per dollar.
1. Fed rate expectations rise
The dollar was almost unchanged on Thursday after reaching a 19-month high earlier in the session. Strong US inflation data and hawkish Federal Reserve remarks drove short-dated Treasury yields higher and prompted markets to reassess the Fed’s rate path. Fed Governor Christopher Waller said he planned to support a quarter-point increase at the December 8-9 meeting unless core CPI came in at 0.3% or more.
2. Euro faces rate divergence
The euro was almost unchanged at $1.1085 after reaching $1.106675, its lowest level since May 2025. Societe Generale strategist Kenneth Broux said the European Central Bank could stop raising rates after its December meeting, widening the rate spread in favor of the dollar. Some brokerages, including Goldman Sachs, now expect another Fed hike early next year in addition to one in December.
3. Yen near intervention threshold
The dollar fell 0.10% to 159.62 yen after touching 159.945, its highest level in over two months. Japan’s top currency diplomat Atsushi Mimura warned it was “too early to forget” the country’s summer intervention as the yen approached 160 per dollar. The Australian dollar fell 0.45% to $0.6826, while the New Zealand dollar lost 0.15% to $0.5552.
