The US dollar strengthened against major currencies on Wednesday, driven by rising expectations of a Federal Reserve interest rate hike in December. Traders now see an 87% chance of a 25-basis-point rate increase, up from 70% a month ago, following stronger-than-expected US inflation data in October. The dollar hit its highest level in over two months against the Japanese yen, climbing to 159.84, and neared the key 160-per-dollar mark. The euro fell 0.65% to $1.11, reaching its lowest point since May 2025.
Elias Haddad, global head of markets strategy at Brown Brothers Harriman & Co, attributed the dollar's strength to a hawkish shift in Fed rate expectations. Recent comments from Fed officials, including Governor Christopher Waller and Dallas Fed President Lorie Logan, amplified concerns over high inflation and the possibility of a larger 50-basis-point hike. The pound dropped 0.50% to $1.33, while the dollar rose 0.93% against the Swiss franc to 0.833.
The US dollar index, which tracks the greenback's performance against six major currencies, gained 0.68% to 102.90, its highest since April 2025. Brokerages like Goldman Sachs and Deutsche Bank revised their forecasts, now expecting rate hikes in December and March, or even December, January, and March. Most developed-market currencies, except the Australian dollar and Norwegian krone, have weakened against the dollar this year due to a widening interest-rate gap and safe-haven flows amid geopolitical tensions.
In cryptocurrencies, bitcoin rose 0.93% to $74,460.41, while ethereum climbed 1.19% to $2,079.31.