TOKYO, Nov 25 (Reuters) - The U.S. dollar traded near its
highest in over a year to the euro and close to a five-year peak
against the yen as a hawkish tilt by Federal Reserve
policymakers, buoyed by solid U.S. data, contrasted with more
dovish monetary outlooks in Europe and Japan.
The dollar index, which measures the greenback
against six major peers, eased 0.1% to 96.733, but remained
within touching distance of Wednesday's high at 96.938, the
strongest level since July 2020.
The index has climbed 2.77% this month as traders bet that
heated inflation would force earlier interest rate hikes than
Fed officials had signalled. The market is fully priced for a
first quarter point hike by June, with strong odds it could be
delivered as soon as May.
"The USD is in beast mode and just doesnt want to go down,"
Chris Weston, head of research at brokerage Pepperstone in
Melbourne, wrote in a client note.
"But when things get too over-loved, the ship can often
tip," he warned.
Minutes of the central bank's Nov. 2-3 policy meeting showed
on Wednesday that various policymakers said they would be open
to speeding up the taper of their bond-buying programme if high
inflation held, and move more quickly to raise interest rates.
Also overnight, readings on the labour market and consumer
spending outstripped economists' estimates, while inflation
continued to heat up.
San Francisco Fed President Mary Daly said in an interview
with Yahoo Finance released the same day that she could see a
case being made to speed up the Fed's tapering of its bond
"The U.S. economy retained its titanium status," while
"slightly hawkish comments from the normally dovish Daly" also
helped to lift the dollar, Tapas Strickland, a director of
economics at National Australia Bank, wrote in a research note.
The dollar was little changed at 115.355 yen,
holding close to the overnight high of 115.525, a level not seen
since January 2017.
The euro added 0.13% to $1.1215, but stayed within
sight of the near 17-month low hit on Wednesday at $1.1186 after
German business confidence slumped for a fifth straight month.
While the U.S. calendar is mostly empty on Thursday due to
the Thanksgiving holiday, minutes from the European Central
Bank's Oct. 28 meeting are due for release.
In a news conference after the monetary authority left
policy unchanged at that meeting, ECB President Christine
Lagarde said officials had discussed "inflation, inflation,
inflation," but after "a lot of soul-searching" had stuck to the
view that inflationary forces will prove transitory.
Lagarde gives a speech at an ECB legal conference later on
Thursday, at which board members Frank Elderson and Edouard
Fernandez-Bollo will also participate.
Sterling rose 0.14% to $1.33465 after dipping as
low as $1.3317 on Wednesday for the first time in 11 months.
Investors remain focused on whether or not the Bank of
England will raise rates on Dec. 16.
The BOE wrong-footed many investors when it kept policy
steady at record lows at the start of the month, following
comments from its governor Andrew Bailey in October that
policymakers "will have to act" to head off inflation.
Bailey speaks at Cambridge University later on Thursday.
Elsewhere, the risk-sensitive Australian dollar
edged up 0.06% to $0.7201, not far from Wednesday's $0.7185, its
lowest level since September.
The New Zealand dollar was little changed at
$0.6870, languishing near the three-month low of $0.6856 hit the
previous day, when the country's Reserve Bank raised the key
rate by a quarter of a percentage point to 0.75%, disappointing
bulls hoping for a half point increase.
(Reporting by Kevin Buckland; Editing by Ana Nicolaci da Costa
& Shri Navaratnam)