US Dollar rises to near 7-month high as inflation data hints Fed’s rate cuts strategy

The United States dollar rose to nearly a seven-month high against major currencies on Wednesday, November 13, after the U.S. inflation data for October showed an increase, in line with market expectations and hinted that the Federal Reserve (FED) would keep cutting rates, reported the news agency Reuters.

The US dollar rose to its highest level since April 16, fueled by Donald Trump's victory in last week's U.S. presidential elections. This victory sparked expectations of potential inflationary tariffs and other measures by the new Trump administration. 

The dollar index rose 0.33 per cent to 106.34 after hitting as high as 106.50. The index measures the American currency against a basket of currencies, including the yen and the euro.

According to the Labor Department's data, the U.S. consumer price index (CPI) rose by 0.2 per cent for the fourth consecutive month, in line with the expectations of the economists amid higher cost for shelters such as rent, reported the agency. In the 12 months through October, the CPI rose 2.6 per cent.

The U.S. Treasury yields fell after the inflation data with the benchmark 10-year bond yield dropping 2.3 basis points to 4.41 per cent, as per the report. 

“So certainly there was a lot of concern going into the number as it's just one of the new bricks in this kind of wall of worry; so there's a little bit of a relief rally and yields are lower,” Marvin Loh, senior global market strategist at State Street in Boston told the news agency.

“It just shows how on edge the market is based on the Fed, based on inflation, and certainly based on this nebulous Trump trade. The dollar seems to be one of the cleanest, easiest ways of playing the Trump trade as well as bitcoin, it seems,” he said.

Other markets

The crypto market witnessed a huge surge, with Bitcoin crossing the $90,000 level for the first time, fueled by Trump's pledge to reduce cryptocurrency regulations. Bitcoin gained 3.63 per cent to $91,519.00, while Ethereum rose 0.46 per cent to $3,295.60. 

Japan's wholesale inflation rose in October at the fastest pace in a year, complicating the Bank of Japan's decision of a rate hike. The Japanese Yen broke through 155 per dollar, the weakest level since late July. It was last at 155.01 yen per dollar. 

The Euro was down 0.43 per cent at $1.0577 as it continued its descent amid expectations of potential Trump tariffs. The dollar weakened 0.02 per cent to 7.241 versus the offshore Chinese yuan.

“The euro is having to deal with the outsized impact they're going to have to deal with from a Trump administration and the uncertainty as to where China fits into the new world order to a certain degree,” Loh told the agency.