Dollar hits 18-month high, then cools as investors await patient Fed
TLT•The dollar hit an 18-month high after stronger-than-expected US inflation data briefly revived bets on a Fed rate hike, then pulled back as investors returned to expecting the central bank to hold rates steady. Traders saw a 65% chance of no change at the Fed’s October 27-28 meeting, up from 53% a month earlier.
1. Dollar pulls back
The dollar index was up 0.34% at 102.53 late Wednesday, after reaching 102.94 earlier in the day. September consumer prices rose sharply as gasoline costs surged, briefly reviving expectations for a rate increase later this month. Fed officials have signaled a wait-and-see approach, and traders now see a 65% chance rates will remain unchanged at the October 27-28 meeting.
2. Euro and sterling weaken
The euro fell 0.41% to $1.1152, reaching a 17-month low against the dollar and a 16-month low against sterling. Rising oil prices and concern about France’s fiscal health weighed on the currency. Sterling fell 0.59% to $1.3177, while the dollar weakened 0.08% against the yen to 158.16.
