Dollar gains as hot inflation, hawkish Fed talk lift rate-hike bets

On November 11, the US dollar strengthened against a majority of currencies due to inflation data and comments from Federal Reserve officials suggesting potential interest rate hikes. The US Dollar Index increased by 0.2% to 102.4, nearing a two-week high. On Tuesday, the index rose 0.5% after US consumer prices surged more than expected in October, marking the third consecutive month of unexpected price increases.

FX dealer Rory Glass stated that the dollar's broad-based support stems from expectations of more aggressive monetary tightening from the Fed. The euro slipped slightly to $1.114, while the pound fell 0.2% to $1.332, near its lowest point in two weeks. The Swiss franc weakened 0.4% to a two-week low, and the Japanese yen eased to a seven-week low.

The Australian dollar was the only G10 currency to rise against the dollar. Traders now anticipate a 25-basis-point rate hike in December, with slim chances of a 50-basis-point hike and a near 75-basis-point hike by September. Some brokerages adjusted their forecasts on Fed policy after Tuesday's data, with Goldman Sachs expecting hikes in December and March, and Deutsche Bank anticipating hikes in December, January, and March.

Most developed-market currencies, except the Australian dollar and the Norwegian crown, have weakened against the dollar this year, with the widening interest-rate gap boosting the US currency. Some analysts also linked the dollar's strength to safe-haven flows during the US-Israeli war on Iran. Bitcoin declined 0.1% to $73,672.8, near its lowest in over two months, while Ether remained steady at $2,055.5.