Dollar gains after US inflation data reinforces Fed rate-hike bets
TLT•The dollar strengthened after US consumer prices rose 0.4% in October, above the 0.3% forecast, and markets priced in a nearly 91% chance of a Fed rate hike in December. The dollar index rose 0.57% to 102.26.
1. Dollar rises after CPI
The dollar strengthened against major currencies after hotter-than-expected US inflation data bolstered expectations that the Federal Reserve would raise borrowing costs next month. The consumer price index rose 0.4% in October, exceeding the 0.3% forecast.
2. Rate expectations increase
The two-year Treasury yield rose 18.44 basis points to 4.731%, while the dollar index gained 0.57% to 102.26. The euro fell 0.55% to $1.116, and the dollar rose 0.55% against the yen to 158.80 and 0.71% against the Swiss franc to 0.8252. Markets priced in a nearly 91% chance of a rate hike in December.
3. Analysts cite inflation risk
Steve Englander of Standard Chartered said the inflation data appeared to support hawkish comments by Federal Reserve Governor Christopher Waller. Karl Schamotta of Corpay said scope for dollar weakness remained limited in the near term, citing resilient US employment and domestic activity.
