Dollar drops slightly from 19-month highs, rate divergence in focus

Résumé détaillé

By Stefano Rebaudo and Javi West Larrañaga Nov 12 (Reuters) - The dollar edged lower on Thursday after reaching the highest level in about 19 months earlier in the session as strong inflation data triggered a hawkish repricing of the Federal Reserve's rate path, driving short-dated US Treasury yields sharply higher.

Nov 12 (Reuters) - The dollar edged lower on Thursday after reaching the highest level in about 19 months earlier in the session as strong inflation data triggered a hawkish repricing of the Federal Reserve's rate path, driving short-dated US Treasury yields sharply higher.

US central bank officials expressed concern over stubborn inflation and left open the possibility of a 50-basis-point increase, with Fed Governor Christopher Waller saying he planned to support a quarter-point increase at the Fed's December 8-9 meeting unless core CPI came in at 0.3% or more.

Some brokerages, including Goldman Sachs, now expect another hike early next year, in addition to one in December.

“Even if the Fed decides to hike 25 basis points at its upcoming meeting, the risk of stickier near-term inflation argues for hiking at both the December and January meetings with the risk of another in March,” Tiffany Wilding, an economist at PIMCO, said.

The dollar index, which measures the greenback against a basket of currencies, was 0.03% up at 102.88 after reaching 103.08 - the highest since April 2025.

New York Fed President John Williams is due to appear on a panel late on Thursday.

"If Williams backs 50 basis points or the idea of 50 at least discussing it, then the market will have to continue to reprice that. And then you can see further dollar strength," said Kenneth Broux, strategist at Societe Generale.

The euro edged 0.03% down at $1.1086, after reaching $1.106675 in the Asian session, its lowest level since May 2025. It fell about 1.3% across Tuesday and Wednesday.

Investors are closely watching rate divergence as differing expectations for central bank policy paths can have a major influence on currency markets. They pointed to diverging signals from central banks after Waller, previously regarded as dovish, opened the door to larger rate hikes.

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