US dollar firms as hot inflation, hawkish Fed talk lift rate-hike bets

[BENGALURU/SINGAPORE] The US dollar rose against most currencies on Wednesday (Nov 11), extending gains after inflation data and hawkish comments from Federal Reserve officials a day earlier fuelled bets that the US central bank will raise interest rates in December.

The dollar index, which measures the greenback’s strength against a basket of six currencies, was 0.3 per cent higher at 102.53, hitting a four-week high.

The gauge traded up 0.5 per cent on Tuesday after data showed US consumer prices increased by more than expected in October with costs higher for food and accommodations, marking a third consecutive month of upside surprises.

“The dollar has continued to have some broad-based support on the expectation that the Fed would be more aggressive in their monetary tightening,” said Rory Glass, an FX dealer at Marex in London.

The Japanese yen eased 0.3 per cent to its weakest in over two months, coming close to the psychologically important 160-per-dollar mark.

The euro depreciated to US$1.113, extending losses after a fall of more than 0.5 per cent on Tuesday. Data on Wednesday showed German inflation slowed to 2.8 per cent in October, confirming a preliminary reading.

THE BUSINESS TIMES INSIGHTS

Powering Asean's Future 2026

Find out how enterprises are navigating power constraints and sustainability targets

ACCESS THE INSIGHTS

The pound fell 0.2 per cent to US$1.33 and was pinned near its lowest point in two weeks, while the Swiss franc weakened 0.5 per cent to hit a two-week low. The Australian dollar edged 0.1 per cent lower, hovering near a seven-month low.

Comments from voting members of the Federal Reserve’s rate-setting committee signalling unease over high inflation have firmed up expectations for further rate hikes, with traders now fully pricing in a 25-basis-point rate hike in December, according to the CME FedWatch Tool.

Traders even saw slim chances of a 50-basis-point rate hike next month and close to 75 basis points worth of hiking by September 2027, data compiled by LSEG showed.

SEE ALSO

Odds of Fed rate hike rise after US consumer prices rise above forecasts in October

Fed’s Paulson calls for gradual rate hikes amid ongoing high inflation 

Oil prices ease to two-month lows as US downplays further Iran strikes

Some brokerages revised their calls on future Fed monetary policy after Tuesday’s data, with Goldman Sachs now expecting hikes in December and March, while Deutsche Bank expects hikes in December, January and March.

Most developed-market currencies, barring the Australian dollar and the Norwegian krone, have weakened against the dollar so far this year as a widening interest-rate gap boosted the US currency.

Some analysts also attributed the dollar’s strength this year to safe-haven flows amid the US-Israeli war on Iran.

In cryptocurrencies, Bitcoin was 0.3 per cent higher at US$73,973.50, holding near its lowest in over two months. Ether held steady at US$2,055.50. REUTERS