The US dollar surged to a 19-month peak against a basket of major global currencies on Thursday, driven by growing market expectations that the Federal Reserve will continue tightening monetary policy.
In international currency trading on 12 November, the dollar index—which measures the greenback’s strength against six major rivals, including the euro, sterling, and the Japanese yen—climbed 0.11 per cent to reach 102.98. This marks the highest level recorded for the index since April 2025, signalling renewed investor confidence in the American currency’s yield advantage.
The rally follows the release of hotter-than-expected US inflation data for October, which has reignited debate over the trajectory of interest rates. Persistent price pressures across the world’s largest economy have prompted senior Federal Reserve officials to adopt an increasingly hawkish tone. Policymakers have expressed concern that inflation remains stubbornly above the central bank’s target range, and several officials have refused to rule out a sharper rate increase of 50 basis points at upcoming policy meetings.
Higher interest rates typically bolster a currency by making dollar-denominated assets more attractive to global investors seeking higher returns. Consequently, traders are now pricing in not only a rate hike in December, but also an additional increase early next year. Major financial institutions and brokerages, including Goldman Sachs, have revised their forecasts to reflect the likelihood of prolonged monetary tightening into the new year.
As the dollar strengthened, rival European currencies faced notable downward pressure. The euro slipped 0.08 per cent to trade at $1.108, marking its weakest position since May last year as the European Central Bank contends with comparatively sluggish economic growth. Sterling fared slightly worse, falling 0.16 per cent to $1.3259 amidst broader market caution.
Meanwhile, the Japanese yen offered a rare exception to the greenback’s broad advance. The dollar edged down 0.03 per cent against the Japanese currency to settle at 159.74 yen, leaving traders on alert for potential market volatility as the pair hovers near psychologically sensitive levels.
