Stronger-than-expected October consumer price index figures propelled the dollar index to a four-week peak of 102.53. In response, financial markets have fully priced in a 25-basis-point Federal Reserve rate hike for December, with brokerages such as Goldman Sachs and Deutsche Bank forecasting continued tightening. The greenback's renewed strength triggered widespread declines across international foreign exchange markets, pushing the Japanese yen near the 160 threshold and dragging the euro down to $1.113 amid cooling German inflation.
Key points
Growing interest-rate differentials and geopolitical safe-haven demand continue to bolste…: Growing interest-rate differentials and geopolitical safe-haven demand continue to bolster the greenback against most global currencies.
Major investment banks including Goldman Sachs and Deutsche Bank now project additional r…: Major investment banks including Goldman Sachs and Deutsche Bank now project additional rate increases extending into early next year.
Cryptocurrency markets remained subdued despite currency volatility, with bitcoin trading…: Cryptocurrency markets remained subdued despite currency volatility, with bitcoin trading near a two-month low of $73,973.5 while ether held flat.
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The US dollar index, which measures the greenback's strength against a basket of six currencies, was 0.3% higher at 102.53, hitting a four-week high.
The gauge traded up 0.5% 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% to its weakest in over two months, coming close to the psychologically important 160-per-dollar mark.
The euro depreciated to $1.113, extending losses after a fall of more than 0.5% on Tuesday. Data on Wednesday showed German inflation slowed to 2.8% in October, confirming a preliminary reading.
The pound fell 0.2% to $1.33 and was pinned near its lowest point in two weeks, while the Swiss franc weakened 0.5% to hit a two-week low. The Australian dollar edged 0.1% lower, hovering near a seven-month…
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