Dollar Reaches Highest Level Since April 2025 as Fed Bets Shift

The DXY dollar index rose to 102.87, putting it on course for its highest close since April 2025. The dollar gained 0.6% against both the euro and the yen. The euro fell to $1.1082, its lowest level since May 2025, according to LSEG data, amid concerns about French debt and reduced expectations for European Central Bank rate increases after oil prices pulled back.

U.S. consumer prices rose 0.4% in October from the previous month, above the 0.3% forecast in a Wall Street Journal survey of economists. Core prices increased 0.3%, also exceeding expectations of 0.2%. Speaking at a London conference, Fed Governor Christopher Waller said he would support a 25-basis-point increase in December, but that policymakers should consider a 50-basis-point hike if October core inflation was 0.3% or higher.

Money markets on Wednesday priced an 88% probability of a 25-basis-point increase at the Fed’s December meeting and a 12% probability of a half-point move, LSEG data showed. “With a December hike already the base case, further dollar gains may require stronger bets on a half-point move,” DHF Capital asset manager Bas Kooijman said in a note. He said a firm producer price index reading on Friday or hawkish Fed remarks could lift yields and push the dollar above recent highs; softer data or opposition to a larger hike could reverse some gains. U.S. bond markets were closed Wednesday for Veterans Day, after Treasury yields rose on Tuesday.

Markets put the probability of a 25-basis-point ECB increase in December at 78%. Rabobank foreign-exchange strategist Jane Foley said the central bank could be reluctant to raise rates beyond December, citing growing concern about the growth outlook. She also pointed to uncertainty over what a possible far-right president in France after next year’s election could mean for EU cooperation. Rabobank expects the euro to weaken to $1.10 within three months.