Dollar scales fresh 19-month peak, yen hits 160 for first time since September

The U.S. dollar climbed on Thursday to an over 19-month high, extending a powerful run fueled by firming Federal Reserve interest rate hike expectations.

At 15:50 ET (20:50 GMT), the U.S. dollar index, which tracks the greenback against a basket of six major peers, climbed 0.3% to 103.17, its highest level since April 7, 2025. 

How big will the December hike be?

The dollar has jumped 1.6% over five sessions, a run that started last Friday after the release of the U.S. jobs report. Total nonfarm payroll employment rose by 165k in October, surging past the consensus estimate of 65k. Additionally, employment for August and September were revised upward by a combined 84k.

After taking a breather on Monday, the dollar renewed its ascent on Tuesday following hotter-than-expected U.S. consumer price index (CPI) readings. Headline consumer prices ticked up 0.4% M/M in October, moderating from a 0.6% rise in September but coming in higher than the anticipated increase of 0.3%. Core CPI, which strips out volatile food and energy prices, remained steady at 0.3% M/M, coming in a tad above the 0.2% consensus.

With the data showing a combination of a stellar labor market and stubbornly high inflation, a central bank in such a scenario typically tightens monetary policy. Adding to the hawkishness, Fed Governor Christopher Waller on Tuesday said he backed hiking rates even if the inflation data had been cooler than anticipated, adding that a higher-than-usual 50 basis point hike to the key policy rate could be warranted if the data comes in hot.

Against this backdrop, traders have all but locked in a Fed rate hike in December. The question now is how big the hike will be. As per the CME FedWatch tool, the odds of a 25 basis point hike stood at nearly 85%, while those of a supersized half-point hike were at about 15%. Higher rate environments tend to strengthen the dollar. 

Sterling slips despite solid GDP 

Turning to other major currencies, the dollar’s momentum weighed on the euro and the sterling. The single currency shed 0.3% to $1.1055, while the sterling lost 0.3% to $1.3236. 

The pound’s decline came despite better-than-anticipated economic growth figures. As per the Office for National Statistics, the United Kingdom’s real gross domestic product (GDP) rose 0.7% in Q3, in-line with consensus estimates and higher than Q2’s 0.5% growth. Real GDP in September grew 0.2% after no growth in August.

The GDP report led to some economists warning that the Bank of England may raise interest rates again as soon as next month, though others said an AI-fueled boom and resilient consumers would struggle to withstand rising energy bills.

"The UK economy hit another level over the summer, growing 0.7% Q/Q in the third quarter of 2026, bang in line with our call," Sanjay Raja, chief UK economist at Deutsche Bank, said.

"But it’s worth putting the UK economic growth performance in context. GDP is up 1.8% so far this year, and pushing at an annualized pace of just above 2.5% – marking the best first three quarters since the pandemic rebound. Strip out the pandemic years and you have to go back to 2017 to find the economy running this hot. Compared to its G7 peers, the UK has relinquished its title as the fastest growing economy this year to the U.S., but only just," he added.    

Yen hits 160 for the first time since early September 

Over in Asia, the Japanese yen briefly breached 160 a dollar for the first time since September 2, a threshold that has historically triggered aggressive currency intervention from authorities in Tokyo. The yen last traded at 159.87 a dollar.

On Monday, Japan’s Ministry of Finance said it had spent a total of 15.4 trillion yen ($96.33 billion) in FX intervention operations from July through September, including a single-day record of 7.98 trillion yen on July 30, and 5.55 trillion yen in an unprecedented joint action with Washington on July 31. It was the first coordinated buying of yen with the U.S. since 1998.

That coordinated intervention briefly flushed out short-sellers and strengthened the yen, pushing the currency down from levels near 164 toward 155. However, the yen has subsequently surrendered the bulk of those gains, as relentless U.S. monetary tightening revives structural demand for the greenback.

Ayushman Ojha and Pranav Kashyap contributed to this article