Dollar Hits 19-Month High as Outlook for Aggressive Fed Rate Hikes Grows

[Financial News] As U.S. inflation rose more sharply than expected, expectations for aggressive rate hikes by the Federal Reserve System (Fed) grew, sending the dollar to its highest level in a year and seven months.
On the 11th (local time), the U.S. Dollar Index (DXY), which tracks the dollar against six major currencies, closed at 102.84, up 0.6% from the previous day. That was its highest level since April 9 last year, when it stood at 102.90.
The dollar rose 0.6% each against the euro and the yen.
The U.S. Consumer Price Index (CPI) for October, released the previous day, rose 0.4% from the previous month, exceeding the market forecast of 0.3%. Core CPI, which excludes energy and food, also rose 0.3%, above the forecast of 0.2%.
Federal Reserve governor Christopher J. Waller said at a conference in London that same day that he supported a 0.25-percentage-point increase in December, but that a 0.5-percentage-point hike should also be considered if core inflation in October was 0.3% or higher.
According to the CME FedWatch Tool, the federal funds futures market priced in a 90.7% probability that the Fed would raise its benchmark rate by 0.25 percentage points from the current range of 3.75–4.00% at its December meeting, and a 9.3% probability of a 0.5-percentage-point increase.
The probability of rates being left unchanged has fallen from 17.3% a week ago to 0%, effectively making a rate hike a foregone conclusion.
The euro fell as low as $1.1082 intraday, its lowest level since May last year, amid concerns over French debt and as falling oil prices reduced expectations for a European Central Bank (ECB) rate hike.

[email protected] Lee Seok-woo, International Affairs Specialist Reporter