The US dollar climbed to its highest level in 19 months on Thursday as investors increased their expectations of further interest rate hikes by the Federal Reserve (Fed), while the Japanese yen remained volatile amid mixed signals from policymakers.

The dollar's rally followed stronger-than-expected US inflation data for October and a series of hawkish comments from Federal Reserve officials, who expressed concerns about persistent inflation and indicated that further monetary tightening could be necessary.

Traders have increased their bets on additional rate hikes, including the possibility of a 50-basis-point increase. Several financial institutions, including Goldman Sachs, now expect another rate hike early next year, in addition to a potential increase in December.

The US dollar index, which measures the greenback against a basket of major currencies, gained 0.11 percent to reach 102.98, its highest level since April 2025.

Meanwhile, the euro slipped 0.08 percent against the dollar to $1.108, marking its weakest level since May last year. The British pound also declined 0.16 percent to $1.3259.

Fed Officials' Comments in Focus

Investors are closely watching comments from New York Federal Reserve President John Williams, who is scheduled to participate in a panel discussion later Thursday.

His remarks are expected to attract attention following the release of October's higher-than-expected Consumer Price Index (CPI) data.

Gavin Friend, senior markets strategist at National Australia Bank, said investors would closely examine Williams' comments for clues about the Fed's future monetary policy.

He noted that expectations had shifted significantly in just two weeks, with central bank officials increasingly highlighting the possibility of further rate increases.

Japanese Yen Faces Fresh Pressure

Against the Japanese yen, the dollar edged down 0.03 percent to 159.74 after fluctuating between gains and losses during Thursday's trading session.

Earlier in the day, the dollar had reached its highest level against the yen in more than two months, driven by widening interest-rate differences between the United States and Japan.

However, comments from Bank of Japan board member Toichiro Asada briefly supported the Japanese currency.

Asada, who opposed interest rate increases in June and September, warned that raising borrowing costs too early could damage economic growth and weaken underlying inflation.

Japan's top currency diplomat, Atsushi Mimura, also cautioned against dismissing the possibility of government intervention in currency markets. His remarks pushed the dollar-yen exchange rate to its lowest level of the day.

However, the yen's recovery was short-lived as broader market expectations continued to favour the US dollar.