Dollar gains traction as Fed speakers warn of risks from inflation
TLT•The dollar index rose 0.1% to 102.30 in Asian trading, nearing a two-week high, as hot inflation data and Fed officials’ comments lifted rate-hike expectations. Futures priced an 85% chance of a 25-basis-point hike next month, while the 10-year Treasury yield rose 13.8 basis points to 4.996%.
1. Dollar extends gains
The dollar extended gains in Asian trading after hotter-than-expected U.S. inflation data and hawkish comments from Federal Reserve officials strengthened expectations for another rate hike next month. The dollar index rose 0.1% to 102.30, approaching its highest level since October 29, after gaining 0.5% on Tuesday.
2. Rate expectations shift
Fed funds futures implied an 85% chance of a 25-basis-point rate increase at the policy meeting concluding December 9. Traders had priced out the possibility of a pause and assigned a 15% chance to a 50-basis-point move, with better-than-even odds of another hike in January. The U.S. 10-year Treasury yield rose 13.8 basis points to 4.996%.
