Bloomberg Dollar Index Rises 0.5% as Strong CPI Bolsters December Fed Rate-Hike Bets

The Bloomberg Dollar Index rose 0.5% on Tuesday after U.S. October CPI exceeded expectations, strengthening market bets on a Federal Reserve rate hike at its December policy meeting. According to Sina Finance, the U.S. Bureau of Labor Statistics reported that the consumer price index excluding food and energy rose 0.3% month over month, above the 0.2% estimate. “Both headline and core CPI were above expectations, supporting the dollar as rate-hike expectations strengthened,” said Andrew Hazlett, a foreign-exchange trader at Monex Inc. He said traders had already been convinced by earlier remarks from Fed Governor Christopher Waller that the Fed would raise rates in December, and the CPI report reinforced those expectations. Waller warned that a one-time 50-basis-point hike might be needed in December. Dallas Fed President Lorie K. Logan said she supported at least two more 25-basis-point rate hikes. Win Thin, chief economist at Bank of Nassau 1982, said inflation was too high and a 25-basis-point December hike was a certainty. He added that, given Waller’s comments, at least one official might vote for a 50-basis-point increase. The pound fell 0.8% to $1.3338, and the euro declined 0.6% to $1.1160. ECB Chief Economist Philip Lane said that if the data did not change over the coming weeks, the European Central Bank should raise rates again at its next meeting. The dollar rose 0.5% to 158.69 yen, while the Australian dollar fell 0.9% to $0.6867.