Dollar Holds at 19-Month High

The US dollar index held above 103 on Friday after gaining for three consecutive sessions and reaching its highest level since April 2025, supported by rising expectations of a more aggressive Federal Reserve tightening cycle. The rally followed stronger-than-expected US consumer inflation data and hawkish comments from Fed officials, with some policymakers indicating that a larger 50-basis-point rate increase could be necessary to bring inflation under control. Markets are currently assigning an approximately 85% probability to a 25-basis-point rate hike in December, while the likelihood of a larger 50-basis-point increase stands at around 15%. Traders are also increasingly factoring in additional rate hikes next year. Investors are now turning their attention to US PPI data for further indications of inflationary trends. Meanwhile, oil prices rebounded as President Donald Trump declared that the US no longer needs a deal with Iran, boosting safe-haven demand for the dollar.

The US dollar index hovered just below 103 on Thursday after gaining more than 1% over the previous two sessions, reaching its highest level since April 2025 amid growing expectations of further Federal Reserve rate hikes. The rally was supported by October inflation data that came in above market forecasts, alongside increasingly hawkish remarks from Fed policymakers. Fed Governor Christopher Waller cautioned that a 50-basis-point rate increase in December may be necessary, while Dallas Fed President Lorie Logan supported at least two additional 25-basis-point hikes as inflationary pressures continue to build. Markets are now assigning roughly a 91% probability to a rate increase next month, with investors also factoring in the possibility of further tightening in January and potentially April. Attention now shifts to Thursday’s initial jobless claims and existing home sales figures for additional insight into inflation trends, labor market conditions and the broader economic outlook.

DXY increased to 102.95, the highest since April 2025. Over the past 4 weeks, Dollar Index gained 0.34%, and in the last 12 months, it increased 3.46%.