By Satoshi Sugiyama
TOKYO, Nov 12 (Reuters) - The dollar rallied to a 19-month high against its major peers on Thursday as traders bet on further Federal Reserve rate hikes, while the yen wobbled after
comments from a dovish central banker and Japan's top currency diplomat warning of volatility.
Traders ramped up bets on further Fed tightening after stronger-than-expected October inflation data and a series of hawkish remarks from US central bank officials, who expressed concern over stubborn inflation and left open the possibility of a 50-basis-point increase.
Some brokerages, including Goldman Sachs, now expect another hike early next year, in addition to one in December.
The dollar index, which measures the greenback against a basket of currencies, rose 0.11% to 102.98, the highest since April 2025. The euro was down 0.08% against the US dollar at $1.108, the lowest since May last year, while the sterling weakened 0.16% to $1.3259.
New York Fed President John Williams is due to appear on a panel late Thursday that will be closely watched given his "pre-October FOMC meeting views the Fed had time on rate hikes," said Gavin Friend, senior markets strategist at National Australia Bank, in a note.
"Fast forward two weeks and following a hotter-than-forecast October CPI report, Fed officials appear to be falling over themselves to talk up rate hikes," Friend said. "Any guidance from Williams will be seized on."
Against the Japanese yen, the dollar eased 0.03% to 159.74 after swinging between gains and losses. The dollar hit a more than two-month high against the yen earlier on Thursday, as traders focused on wide interest-rate differentials amid growing bets on further Fed hikes.
Bank of Japan board member Toichiro Asada, one of two policymakers who dissented from raising interest rates in June and September, pushed back against calls within the board for a near-term interest rate hike, saying in a speech that premature rate hikes could hurt growth and push down underlying inflation.
Earlier, Japan's top currency diplomat Atsushi Mimura warned that it was "too early to forget" intervention by Japanese authorities during the summer, pushing the dollar/yen pair to its lowest point of the day. But the respite for the yen was brief.
"Once dollar/yen rises above 160, I think caution will increase another notch," said Sho Suzuki, market analyst at Matsui Securities.
"For it to move higher from there, the dollar would need to strengthen further, for example, through a further rise in expectations for Fed rate hikes, or a drop-off in expectations for BOJ rate hikes. Without something like that, the pair may lack enough momentum to test a break above 160," he said.
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 Australian dollar weakened 0.15% against the greenback to $0.6836, hovering near a seven-month low, while New Zealand's kiwi lost 0.18% to $0.5552.
In cryptocurrencies, bitcoin fell 1.03% to $73,548.43. Ether declined 1.05% to $2,046.72.
(Reporting by Satoshi Sugiyama; Editing by Cynthia Osterman, Edwina Gibbs and DJ Yap)
