The US dollar climbed to a 19-month peak against major global currencies on Thursday, fuelled by persistent inflation data and growing expectations that the Federal Reserve will maintain a hawkish monetary policy. The rally has placed significant downward pressure on rivals such as the euro and sterling, reigniting global debate over the broader economic consequences of prolonged monetary tightening.
During international trading on 12 November, the dollar index—which gauges the greenback’s strength against six major currencies—rose by 0.11 per cent to reach 102.98. This marks the index’s highest level since April 2025. The upward momentum stems directly from fresh American inflation figures and shifting expectations surrounding the Federal Reserve’s upcoming interest rate decisions.
Official data revealed that the US Consumer Price Index (CPI) increased by 0.4 per cent month-on-month in October, outpacing economists’ consensus forecast of a 0.3 per cent rise. Having now exceeded expectations for three consecutive months, stubborn price pressures have complicated the central bank’s path towards its 2 per cent inflation target. Consequently, policymakers face mounting pressure to take firmer action.
Recent remarks from Federal Reserve officials have reinforced this market sentiment. Several policymakers suggested that curbing inflation may require stricter measures than previously anticipated, with some refusing to rule out a 50-basis-point rate hike—double the standard 25-basis-point increment.
Market analysts increasingly anticipate a rate increase in December, followed by potential further tightening in early 2027. Major financial institutions, including Goldman Sachs, have adjusted their outlooks to reflect the likelihood of additional rate hikes in the first quarter of next year.
Interest rate differentials remain a primary catalyst behind the dollar’s appeal. Higher US borrowing costs boost yields on American government bonds and dollar-denominated assets, drawing international capital away from lower-yielding currencies. Even so, analysts caution that rate expectations are not set in stone; the central bank’s final decisions will depend heavily on incoming employment figures, inflation trends, and overall economic resilience.
As the greenback gained ground, major European currencies retreated. The euro slipped 0.08 per cent to $1.108, hovering near its lowest level since May last year. Sterling experienced a steeper decline, falling 0.16 per cent to settle at $1.3259 amidst cautious investor sentiment.
The Japanese yen bucked the broader trend slightly, edging up 0.03 per cent to 159.74 per dollar. Despite the marginal gain, the yen remains historically weak. Trading perilously close to the psychologically sensitive 160 mark, the currency continues to suffer from the wide interest rate gap between Washington and Tokyo, keeping Japanese market watchers on high alert.
A stronger dollar carries substantial implications for the wider global economy, particularly for import-reliant nations. Countries dependent on the US currency to purchase fuel, foodstuffs, industrial raw materials, and technology face rising import bills as their domestic currencies weaken. Over time, these elevated costs threaten to trickle down to consumers, exacerbating local inflation and driving up the cost of living.
For import-dependent economies like Bangladesh, fluctuations in the global dollar index warrant close attention. Any domestic currency instability could inflate the cost of importing vital commodities such as fuel, edible oil, fertiliser, and industrial inputs. However, a global surge in the greenback does not automatically trigger an immediate, proportional spike in local exchange rates. Domestic factors—including foreign exchange reserves, remittance inflows, export earnings, import demand, and central bank interventions—all play a decisive role in stabilising the local market.
Looking ahead, the Federal Reserve’s next policy moves will remain the focal point of global currency markets. December’s rate decision and economic projections for the coming year will largely dictate the dollar’s trajectory. Should US inflation prove resistant to current measures, the greenback’s dominance is likely to persist; conversely, any signs of cooling price pressures could swiftly temper rate hike bets and shift market momentum.
