Dollar Hits 16-Month High on Prospect of Higher U.S. Rates — Update

By Renae Dyer

The dollar jumped to a 16-month high against a basket of currencies on Thursday as it continued to derive support from the prospect of the Federal Reserve raising interest rates further.

Minneapolis Federal Reserve President Neel Kashkari said on Wednesday price pressures remained elevated even after the Fed's preferred inflation measure, the personal consumption expenditures price index, came in lower-than-expected Wednesday.

Speaking at an event in New York, he said: "I didn't think the inflation data today really changed that story for me very much."

The DXY dollar index rose to a 16-month high of 101.848 in early European trade. The euro fell to a 16-month low of $1.1286. The dollar also hit a 16-month high against the Swiss franc at 0.8382 francs, according to LSEG data.

"The dollar maintained its dominance, supported by relative growth resilience and widening rate differentials," Tickmill Group partner of market strategy, Patrick Munnelly, said in a note.

PCE inflation unexpectedly eased to an annual rate of 3.4% in August from 3.7% in July.

The data "barely put a dent in Fed tightening expectations, perhaps because U.S. activity data continues to come in on the encouraging side," ING global head of markets Chris Turner said in a note.

Consumer spending data are holding up and there were signs of payroll growth accelerating in Wednesday's ADP private payrolls report, he said. Monthly nonfarm payrolls data are due Friday.

While pricing for a 25 basis-point interest-rate rise at the Fed's October meeting fell to 39% on Wednesday from 73% before the PCE data, markets continued to anticipate nearly four rate increases by the end of next year, LSEG data showed.

"The Fed will now wait to see the upcoming U.S. nonfarm payrolls report on Friday and U.S. consumer price inflation report for September on October 14 as they continue to assess when to hike rates further," MUFG Bank senior currency analyst Lee Hardman said in a note.

Write to Renae Dyer at renae.dyer@wsj.com

(END) Dow Jones Newswires

October 01, 2026 05:38 ET (09:38 GMT)