The Dollar Holds at A 32-Year Peak vs. The Yen

The dollar held a 32-year high against the yen and recovered from a two-week low against a basket of major peers, supported by expectations of aggressive interest rate hikes by the United States Federal Reserve. Sterling fell on Wednesday.

The British pound fell 0.57% to $1.12570 at 1100 GMT after data showed that annual consumer price inflation in Britain rose to 10.1% in September, higher than expected and returning to a 40-year high reached in July.

Sterling is expected to remain under pressure as investors anticipate rising inflation and a recession in the United Kingdom, prompting the Bank of England to raise interest rates by 75 basis points rather than 100 basis points at its November meeting. In other news, the dollar rose 0.2% to 149.61 yen.

Interest rate differentials continue to drag the dollar/yen higher. The dollar index compares the US currency to six other currencies, including the yen, sterling, and euro, which rose 0.7% to 112.74, falling to its lowest level since October 6 at 111.76 on Tuesday.

The greenback, currently the safe currency of choice, has sagged this week amid the global bear rally in equities following some positive earnings.

However, market pricing for two more 75 basis point hikes from the Fed this year as it focuses on red-hot inflation, even at the risk of triggering a recession, continues to provide underlying support.

Fiscal uncertainty in the United Kingdom is also clouding the outlook for global markets.

The euro fell 0.8% to $0.97801 after hitting a high of $0.98755 on Tuesday, a level last seen on October 6.

The New Zealand dollar has remained elevated, up 2% this week. The currency was last trading 0.162% lower at $0.56710, close to the two-week high of $0.5729 set on Tuesday.