The dollar rose on Wednesday, hitting its highest level in four months against a basket of currencies, as expectations for central bank easing weighed on major global peers. The dollar has benefited in recent weeks from data showing strength in the US labour market and inflation that has bolstered expectations the Federal Reserve may raise rates before the end of the year.
Fed funds futures rates point to investors seeing about a 46 percent chance the Fed will raise interest rates by its December meeting, according to CME Group's FedWatch tool, compared with less than 20 percent a few weeks ago. Expectations of a Fed increase come as other major central banks around the world gear up to ease monetary policy. "Really, you're kind of seeing the tone in the rest of the dollar block and the majors be a little bit softer," said Mark McCormick, North American head of FX strategy at TD Securities in Toronto. "I think what you're seeing is idiosyncratic risk in most G10 currencies."
The dollar index, which tracks the currency against a basket of six major rivals, hit a peak of 97.323 in European trade, its highest level since March 10. It was last trading at 97.173, up 0.1 percent on the day. The dollar rose 0.5 percent against the yen to 106.715 yen, its highest level since June 24, when markets were shaken by Britain's surprise vote to exit the European Union.
The euro fell 0.15 percent against the dollar as markets sold euros ahead of the European Central Bank policy meeting on Thursday. Policymakers are not expected to announce further easing but could signal a bias for monetary stimulus in the future, analysts said. Meanwhile, sterling outperformed, rising 0.3 percent to $1.3154 after a Bank of England survey showed no clear evidence of slowing economic activity after last month's Brexit vote.