US dollar firms as hot inflation, hawkish Fed talk lift rate-hike bets
The yen is down at a two-month low versus the greenback
The US dollar strengthened on Wednesday as worries over high inflation and remarks from Federal Reserve officials encouraged expectations of further interest rate hikes, boosting rate-hike speculation. The dollar index rose 0.3% to 102.53, hitting a four-week high. The dollar gained 0.5% on Tuesday after data revealed US consumer prices surged more than expected in October, marking a third consecutive month of upward surprises.
Rory Glass, an FX dealer at Marex in London, noted that the dollar enjoyed broad-based support from the expectation of a more aggressive Fed monetary tightening. The Japanese yen weakened to its weakest level in over two months, nearly reaching the psychologically significant 160-per-dollar mark. The euro also fell to US$1.113, extending losses after a more than 0.5% decline on Tuesday.
German inflation data for October showed a slower pace, confirming a preliminary reading at 2.8%. The pound weakened 0.2% to US$1.33 and was close to its two-week low, while the Swiss franc dropped 0.5% to a two-week low. The Australian dollar edged down 0.1% and hovered near a seven-month low. Federal Reserve officials' comments signaling concern over high inflation solidified hopes for additional rate hikes, with traders now fully pricing in a 25-basis-point increase in December, according to the CME FedWatch Tool.
Some brokerages revised their predictions for future Fed monetary policy after Tuesday's data, with Goldman Sachs now anticipating hikes in December and March, while Deutsche Bank expects hikes in December, January, and March. Most developed-market currencies, except the Australian dollar and the Norwegian krone, have weakened against the dollar this year due to the widening interest-rate gap, which has supported the US currency.
Some analysts also attributed the dollar's strength this year to safe-haven flows resulting from the US-Israeli war in Iran. Bitcoin saw a 0.3% increase at US$73,973.50, hovering near its lowest in over two months, while Ether remained steady at US$2,055.50.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
