Dollar Soars To 3-Week Highs on Signs of 'Inflationary Pressures
The dollar rose to three-week highs against a basket of major currencies after upbeat wholesale inflation data suggested that weakness in inflation could be waning ahead of the Federal Reserve interest rate decision.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.26% to 94.18.
The Labor Department said on Wednesday its producer price index for final demand increased 0.4% last month. In the 12 months through August, the PPI rose 3.1% after rising 2.8% in October. That beat economists’ forecast of a 2.9% for November.
The upbeat wholesale inflation report raised expectations for a solid consumer inflation report due Wednesday. Bank of Tokyo Mitsu said the PPI data showed a sharp improvement in producer inflation, and added that the demand-led price push from higher commodity prices was a “classic” signal of increasing inflationary pressures.
Investor focus, meanwhile, is expected to shift to monetary policy as the Federal Open Market Committee (FOMC) got its two-day meeting underway on Tuesday, ahead of the Wednesday’s interest rate decision.
According to investing.com’s fed rate monitor tool, 100% of traders expect the Federal Reserve to raise rates on Wednesday for the third time this year.
Elsewhere, sterling struggled to hold gains against the greenback, falling 0.17% to $1.3317 despite better-than-estimated inflation data.
USD/CAD rose 0.19% to $1.2881 as the pair was supported by a slump in oil prices.