Dollar value highest in 19 months
The dollar strengthens due to the prospect of an aggressive interest rate hike by the Federal Reserve, and the euro is at its lowest in over a year and six months.
Quick Look
- When the U.S. consumer price index in October exceeded market expectations, the prospect of an aggressive interest rate hike by the Federal Reserve increased, and the value of the dollar rose to its highest level in 1 year and 7 months.
- The dollar index closed at 102.84, and the euro fell to $1.1082.
AI-generated summary
Why It Matters
The U.S. consumer price index in October rose 0.4% compared to the previous month, exceeding market expectations, and the core CPI also rose 0.3%. Accordingly, the possibility of the Federal Reserve System raising interest rates in December has increased.
As U.S. prices rose more steeply than expected and the prospect of an aggressive interest rate hike by the Federal Reserve System (Fed) increased, the value of the dollar rose to its highest level in one year and seven months.
On the 11th (local time), the Dollar Index (DXY), which represents the value of the dollar against six major currencies, closed at 102.84, up 0.6% from the previous day. It is the highest level since April 9 last year (102.90).
The dollar rose 0.6% against the euro and yen each.
The US Consumer Price Index (CPI) for October, announced the previous day, rose 0.4% compared to the previous month, exceeding market expectations (0.3%). Core CPI, excluding energy and food, also rose 0.3%, exceeding expectations (0.2%).
Federal Reserve Director Christopher Waller said at a conference in London on the same day that he supports a 0.25 percentage point increase in December, but that a 0.5 percentage point increase should also be considered if the core inflation rate in October is above 0.3%.
According to FedWatch of the Chicago Mercantile Exchange (CME), the federal funds rate futures market reflected a 90.7% probability of raising the benchmark interest rate by 0.25 percentage points from the current 3.75-4.00% at the December Federal Reserve meeting, and a 9.3% probability of raising it by 0.5 percentage points.
The possibility of a freeze has fallen from 17.3% a week ago to 0%, making the increase a fait accompli.
The euro fell to $1.1082 during the day, hitting its lowest level since May of last year, as expectations of an interest rate hike by the European Central Bank (ECB) decreased due to falling oil prices due to concerns about French debt.
What to Watch
AI outlook — possibilities, not facts
The Federal Reserve is likely to raise its benchmark interest rate by 0.25 percentage points at its December meeting.
Very likely · Within weeks
Open Questions
- Will the Federal Reserve actually raise interest rates by 0.25 percentage points or 0.5 percentage points in December?
- The specific impact that a strong dollar will have on the economies of other countries, including Korea
