(Updates to late New York trading)
The dollar rallied against the yen, euro and other currencies on Tuesday after stronger-than-expected U.S. inflation data boosted investor bets that the Federal Reserve will need to stay aggressive in raising interest rates.
The dollar index =USD , which tracks the greenback against its peers, was up 1.5% at 109.85 and hit its highest in a week, heading back toward last week's two-decade peak of 110.79. The index turned positive after the data release.
The euro EUR=EBS , pound GBP=D3 and yen JPY=EBS all weakened sharply. The euro was last down 1.5% versus the greenback at $0.9973, after hitting a nearly one-month high of $1.0198 in the previous session. The euro has traded below parity in 16 of the last 17 sessions.
According to the Labor Department report, U.S. consumer prices unexpectedly rose in August and underlying inflation picked up amid rising costs for rents and healthcare.
"The data was far stronger than expected. Particularly worrisome is the fact that core inflation came in almost double estimates," said Karl Schamotta, chief market strategist at Corpay in Toronto.
"This is going to put the idea of transitory inflation to bed for now and anchor U.S. yields and the dollar substantially higher. The key thing here is that we're now looking at near-certain odds on a 75-basis-point move next week."
After the report, interest-rate futures traders dumped any lingering bets on Fed policymakers slowing their rate hike pace when they meet next week. They piled into bets on a third straight 75 basis points hike that would lift the Fed's current 2.25% to 2.5% policy rate range to 3% to 3.25%, and rate contracts now also reflect about one-in-four odds of a surprise full-percentage-point increase at the Sept. 20-21 meeting.
The dollar had eased in recent sessions after its strong run higher, while the euro had been gaining in recent sessions following hawkish talk from the European Central Bank.
Against the yen, the dollar was last up 1.2% at 144.51. Earlier, the Japanese currency found support from comments from officials signaling the government could take steps to counter excessive yen weakness.
Sterling was down against the dollar as well. The pound was last down 1.6% at $1.1499. Earlier in the day, it rose to a two-week high after the British jobless rate dropped to its lowest level since 1974, while wages excluding bonuses rose by 5.2%, the highest rate since the three months to August 2021.
In cryptocurrencies, bitcoin BTC=BTSP last fell 9.48% to $20,277.00, while ether ETH=BTSP was down 6.8% at $1,600.
======================================================== Currency bid prices at 4:08PM (2008 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 109.8500 108.2200 +1.53% 14.830% +109.8900 +107.6700 Euro/Dollar EUR=EBS $0.9973 $1.0122 -1.47% -12.27% +$1.0188 +$0.9970 Dollar/Yen JPY=EBS 144.5050 142.8200 +1.19% +25.53% +144.6750 +141.6050 Euro/Yen EURJPY= 144.12 144.58 -0.32% +10.59% +145.0300 +144.0400 Dollar/Swiss CHF=EBS 0.9616 0.9539 +0.83% +5.45% +0.9632 +0.9482 Sterling/Dollar GBP=D3 $1.1499 $1.1683 -1.56% -14.97% +$1.1738 +$1.1497 Dollar/Canadian CAD=D3 1.3167 1.2985 +1.41% +4.14% +1.3174 +1.2954 Aussie/Dollar AUD=D3 $0.6733 $0.6889 -2.26% -7.37% +$0.6916 +$0.6726 Euro/Swiss EURCHF= 0.9591 0.9652 -0.63% -7.50% +0.9677 +0.9585 Euro/Sterling EURGBP= 0.8671 0.8662 +0.10% +3.23% +0.8694 +0.8649 NZ NZD=D3 $0.5992 $0.6137 -2.38% -12.47% +$0.6161 +$0.5987 Dollar/DollarDollar/Norway NOK=D3 10.1080 9.8455 +2.71% +14.79% +10.1185 +9.8185 Euro/Norway EURNOK= 10.0824 9.9616 +1.21% +0.69% +10.0908 +9.9547 Dollar/Sweden SEK= 10.6915 10.4874 +0.61% +18.56% +10.6979 +10.4140 Euro/Sweden EURSEK= 10.6645 10.5996 +0.61% +4.21% +10.6708 +10.5995 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5E^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
