The dollar held near a two-week high after hotter-than-expected U.S. consumer prices and hawkish Fed comments. Markets now price a 91% chance of a December rate increase, and USD/JPY reached its highest since late September.
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, after climbing 0.6% on Tuesday.
Hot CPI and hawkish Fed speakers lift hike bets
U.S. consumer prices rose 0.4% in October, above economists' expectations for a 0.3% increase. That raised 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. He argued that policymakers should consider a larger 50-basis-point increase if price pressures worsened.
Dallas Fed President Lorie Logan, meanwhile, said the central bank needed at least two more quarter-point rate increases to bring inflation under control.
Markets now price a 91% chance of a 25-basis-point increase at the Fed's December meeting, compared with 84% on Monday, according to CME FedWatch data. The probability of a larger, 50-basis-point hike rose to 10%.
Yen weakens as USD/JPY hits its highest since late September
The Japanese yen stayed under pressure. USD/JPY traded 0.1% higher after rising to 158.95 yen earlier in the day, its highest since late September. The pair had jumped 0.5% on Tuesday after the CPI report.
Elsewhere, EUR/USD ticked 0.1% lower after falling 0.5% on Tuesday. AUD/USD edged up 0.2%, recovering slightly after falling nearly 1% to a seven-month low in the previous session.
Asian currencies faced competing forces. Lower oil prices offered some relief to energy-importing economies, but rising U.S. yields and a firmer dollar threatened to limit gains.
Source: Investing.com
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