Dollar climbs with rate hike speculation raging on U.S. inflation surge
The dollar index jumped sharply on Wednesday, hitting its highest level since July 2020, after U.S. consumer prices surged to their highest rate since 1990, fueling speculation that the Federal Reserve may raise interest rates sooner than expected.
At 1543 EDT (2043GMT), the dollar index, which measures the greenback against other major currencies, was up 0.96% at 94.8580 after reaching a high of 94.876, its highest level in more than 15 months.
Inflation fears, poor bond auction push yields higher
Inflation expectations soared, with the five-year breakeven inflation rate reaching a record-high 3.113% and the 10-year breakeven rate rising to 2.72%, the highest since May 2006.
The benchmark 10-year yield had its biggest session climb since Feb. 25, jumping as high as 1.592%. It was last up 12.4 basis points at 1.5733%.
On the shorter end of the curve, the two-year yield, which typically moves in step with interest rate expectations, had its biggest upward move since March 2020. It was last 11.2 basis points higher at 0.5209%.
The euro was last down 1% at $1.1481 after earlier touching $1.1480, its lowest level since July 21 2020.
Meanwhile sterling fell to its lowest level since December 23 while Britain and the European Union looked far from finding a post-Brexit agreement over Northern Ireland, adding to pressure from the U.S. inflation data.
Sterling was last down 1.12% at $1.3406 after blowing past Friday's low $1.3425, when the currency was hammered by the Bank of England's surprise decision to keep rates unchanged.
In cryptocurrencies, bitcoin jumped to an all-time high of $69,000.00 after the U.S. inflation data but proceded to lose ground and was last down 1% at $66,221.75.
Against Japan's yen the greenback was last up 0.89% to 113.875 yen after touching a session high of 114 yen. On Tuesday the dollar had hit a month-low against the yen.
Reference: Reuters
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