Dollar holds gains as Fed hike bets rise after hot U.S. CPI; yen near 6-wk low
The dollar held near a two-week high on Wednesday as stronger-than-expected U.S. inflation and hawkish Federal Reserve comments reinforced expectations of an interest-rate increase next month.
The U.S. dollar index edged up 0.1% to 102.302 by 01:31 ET (06:31 GMT), after climbing 0.6% on Tuesday.
Fed hike bets strengthen after hot CPI, hawkish comments
The greenback had strengthened after data showed that U.S. consumer prices rose 0.4% in October, above economists’ expectations for a 0.3% increase, raising concerns that inflationary pressures remain persistent.
Fed Governor Christopher Waller said on Tuesday he would support a rate increase in December even if inflation cooled, and argued that policymakers should consider a larger 50-basis-point increase if price pressures worsened.
Dallas Fed President Lorie Logan said the central bank needed at least two more quarter-point rate increases to bring inflation under control.
Markets are now pricing in a 91% chance of a 25-basis-point increase at the Fed’s December meeting, compared with an 84% probability on Monday. The probability of a larger, 50-basis-point hike rose to 10%, according to CME FedWatch data.
Japanese yen near 6-week low
The euro’s EUR/USD pair ticked 0.1% lower after falling 0.5% on Tuesday.
Asain currencies faced competing forces, with lower oil prices offering some relief to energy-importing economies even as rising U.S. yields and a firmer dollar threatened to limit gains.
Brent crude briefly fell below $90 a barrel on Tuesday, its lowest level since August, amid continued diplomatic efforts to resolve the Middle East conflict. Cheaper oil can improve the terms of trade for major importers such as India and ease pressure on their currencies by reducing energy-import bills.
The Japanese yen’s USD/JPY traded 0.1% higher after rising to 158.95 yen earlier in the day — its highest since late September. The pair jumped 0.5% on Tuesday after hot U.S. CPI.
The Australian dollar’s AUD/USD pair edged up 0.2%, recovering slightly after falling nearly 1% to a seven-month low in the previous session.
The Indian rupee’s USD/INR fell 0.2%.
