US dollar hits 6-month high as US inflation comes into focus!
The US dollar hit a fresh 6-month high against other major currencies on Wednesday and the Japanese yen fell to its lowest level since July, boosted by so-called "Trump trades" ahead of key US inflation data later during the day.
The dollar is reaping the benefits of Republican Donald Trump's victory in the US presidential election last week, which pushed the US currency to its highest level since May 1 at 106.21 against a basket of currencies.
Investors are pricing in lower tax policies and new trade tariffs under the incoming administration, measures seen as inflationary that could prompt the Federal Reserve to rein in the expansion of interest rate easing. Meanwhile, Republicans moved closer to taking full control of Congress, which would give the president-elect more power to advance his agenda.
The full extent of threatened US tariffs on global imports, potential fiscal stimulus through tax cuts and deregulation, and data pointing to continued US economic strength next year are all support for the dollar. The focus on Wednesday will be on a new reading on US inflation, with the October Consumer Price Index (CPI) report due at 1330 GMT. The core index is expected to have increased by 0.3% in October, in line with last month's increase.
Fed Chairman Jerome Powell is scheduled to speak this week, ahead of wholesale price data on Thursday and retail sales on Friday. Markets currently assign about a 60% chance of another quarter-point rate cut by the Fed in December, up from about 84% a month ago, according to CME Group's FedWatch Tool. The US dollar index rose 0.1% to 106.12, rising for a fourth straight session.
Bitcoin halted its record rally, falling about 1% to $87,428 after hitting an all-time high of $89,998 on Tuesday. Trump has vowed to make the US "the crypto capital of the planet."
The smaller dogecoin eased off its all-time high. Trump said Elon Musk will co-head the Department of Government Efficiency, and the newly created department's acronym — DOGE — refers to the name of the dogecoin cryptocurrency that Musk promotes.
The yen slipped to 155 per dollar, the Japanese currency's weakest level since July 30. Japan's headline inflation accelerated in October to its fastest annual pace in more than a year, complicating the Bank of Japan's decision on how quickly to raise interest rates.
The euro struggled for support amid political uncertainty as Germany, the bloc's biggest economy, holds snap elections on February 23 following the collapse of Chancellor Olaf Scholz's governing coalition last week.
Meanwhile, markets are mulling Trump's possible tariffs against Europe as well as China. The euro edged near a one-year low of $1.059425 and was last down 0.1% at $1.0611. The pound eased to $1.27370, closing at a three-month low of $1.27190 from Tuesday.
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