Dollar hits 19-month high as hawkish Fed view lifts yields

By Chibuike Oguh

NEW YORK, Nov 12 (Reuters) - The dollar rose against major currencies on Thursday, climbing to its highest level in about 19 months as investors pushed Treasury yields higher following a hawkish reassessment of the Federal Reserve's interest-rate path.

Fed officials this week warned that inflation remains stubbornly elevated, with some signaling openness to a 50-basis-point rate increase if price pressures fail to ease. Strong US inflation data released on Tuesday reinforced that view, prompting traders to raise expectations for further policy tightening.

The euro dropped 0.32% to $1.1055, hitting its lowest level against the dollar since April 2025.

The dollar was last up 0.26% to 0.835 against the Swiss franc, reaching a one-month high.

"The dollar has strengthened almost exclusively based on Fed expectations," said Eugene Epstein, head of trading and structured products at Moneycorp. "If you look at Fed funds futures, the correlation is quite high in the last couple of days with the move in the dollar. And Fed funds futures themselves are high because (a) CPI was stronger than expected and (b) there's been a fair amount of hawkish comments from numerous Fed speakers."

Investors are now pricing in a near 85% chance of a December Fed rate hike, according to the CME's FedWatch tool. The yield on the 2-year note, which typically moves in step with Fed rate expectations, was last up 13.96 basis points to 4.867%. The yield on benchmark US 10-year notes was last up 12.39 basis points to 5.113%.

Some brokerages, including Goldman Sachs, now expect another hike early next year, in addition to one in December. New York Fed President John Williams is due to appear on a panel late on Thursday.

The dollar index, which measures the greenback against a basket of currencies, was last up 0.29% at 103.17, remaining at its highest since April 2025.

YEN MOVES

Japan's top currency diplomat, Atsushi Mimura, warned market participants on Thursday that it is "too early to forget" this summer's intervention as the yen again edged towards the key level of 160 to the dollar. 

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, from 6.8% in September.

The Japanese yen weakened 0.13% against the greenback to 159.975 per dollar, dropping to its lowest level since September.

"This week’s decline in the broad yen has mostly come from dollar developments, but we note that in trade-weighted terms, the yen is now at weaker levels than ahead of reported rate checks in January and September," said Goldman Sachs analysts led by Stuart Jenkins.

"At the same time, this year’s realised thresholds for actual intervention remain further away: the trade-weighted yen is still almost exactly 1% stronger than prior to MoF intervention in late April, and around 2.6% stronger than ahead of joint intervention starting in late July."

The Australian dollar weakened 0.59% against the greenback to $0.6807, hitting its lowest level since January, while New Zealand's kiwi lost 0.27% to $0.5547.  

(Reporting by Chibuike Oguh in New York; additional reporting by Stefano Rebaudo; Editing by Nia Williams and Cynthia Osterman)