NEW YORK: The dollar rose to almost 16-month highs against the euro and other currencies on Thursday, after the hottest U.S. inflation reading in 30 years encouraged bets on interest rate hikes.
Wednesday’s data showed that U.S. consumer prices grew last month at their fastest annual pace since 1990, fueling speculation that the Federal Reserve will have to respond by lifting interest rates faster than expected as traders question the central bank’s stance that the current spate of high inflation is transitory.
While the U.S. bond market was closed for the Veterans Day holiday, the dollar index still looked set for its second straight day of gains so far touching its highest level since July 23 2020. It was last up 0.19% at $95.003.
The euro was down 0.07% at $1.1468 after hitting $1.1454 its lowest since July 21 2020.
“It feels like we’re still trading the repercussions of the CPI,” said Vassili Serebriakov, FX strategist at UBS in New York.
“The path of least resistance in the short term appears to be dollar higher .. Stronger inflation weakens the transitory narrative which means the Fed might need to tighten sooner.”
Sterling was down 0.03% at $1.3396 after earlier hitting $1.33650, its lowest level since Dec. 2020. Data showing Britain’s economy lagging rivals in the July-September period did little to help.
The greenback was last up 0.01% against Japan’s yen and traded a range of 113.81 yen to 114.15 during the session after the dollar rose sharply against the yen on Wednesday.
“The hawkish repricing of Fed policy expectations has reinforced the U.S. dollar’s upward momentum from the previous week in which it had already benefited from the other G10 central banks pushing back against rate hike expectations outside of the U.S,” said Lee Hardman, currencies analyst at MUFG.
Emerging market (EM) currencies had also suffered from the dollar’s broad rise on Wednesday and earlier in Thursday’s session but MSCI’s EM currencies index was last up 0.07%.
The Australian and New Zealand dollars slipped, pulled lower by the jump in the U.S. dollar. The Aussie 0.28% to $0.7305 fell half a percent to a one-month low of $0.7287 and New Zealand’s Kiwi dropped 0.4% to $0.7034.
Elsewhere, Turkey’s lira tumbled to a new record low of 9.975 to the dollar after the U.S. inflation reading and as expectations grow Turkey will cut rates again soon.
In crypto currencies, bitcoin was up 0.48% at $65,229.81 after hitting a $69,000 intraday record on Wednesday.
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