Dollar nears 19-month high on inflation-fueled Fed rate hike bets

The US dollar is heading for its largest weekly gain in two months, nearing a 19-month high, as traders increase bets on a larger Federal Reserve interest rate hike next month following stronger-than-expected inflation data and hawkish comments from Fed officials. The dollar index rose 0.1% to 103.34, close to its highest level since April 2025, while two-year Treasury yields climbed around 32 basis points to nearly 4.84%, their biggest weekly rise since April 2025. Traders now price in a roughly 92% chance of a 25-basis-point rate hike next month, according to the CME FedWatch tool. The Japanese yen remained weak at 159.84 per dollar, near its lowest level since early September, prompting Finance Minister Satsuki Katayama to say the government would respond appropriately to currency volatility. The Australian and New Zealand dollars also declined, while bitcoin fell 4.73% to $68,126.21 and ethereum dropped 5.02% to $1,914.61.