US Dollar jumps as inflation builds solid case for rate-hike

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US Dollar jumps as inflation builds solid case for rate-hike

On Friday, the US Dollar Index (DXY) measured against a basket of six major currencies on an average had clawed back sharply from yesterday’s losses as US Treasury Yields jumped with 10-year Treasury bond notes rising to 1.56 per cent following media headlines that US inflation continued to rise faster-than-anticipated last month, eventually building a solid case for a much earlier-than-anticipated rate-hike which seemingly had restored a safe-haven appetite for the greenback.

In point of fact, in the day’s late-session rally in US Dollar that had prompted a guileless sell-off wave in most major and emerging market currencies, came forth as US Commerce Department had told in a statement earlier in the day that US consumer spending leapt 0.6 per cent and the US Fed’s key inflation indicator, core PCE (Personal Consumption Expenditure) price index, rose 0.2 per cent in September, as market participants appeared to be cashing in on an earlier rate-hike bet.

Apart from that, over the past twelve months through September, US core PCE price index climbed as much as 3.6 per cent, nearly double of the US Federal Reserve’s target of 2.0 per cent. In tandem, a robust rise in consumers sentiment as cited by the US Conference Board, Inc., a day earlier, alongside a robust consumer spending had heightened up frets of a long duration of higher inflation, undercutting the US Fed Chair Jerome Powell’s long-held view that a blistering rise in inflation indicators would likely to be ‘transitory’ which eventually fared well for the greenback.

US Dollar gains as rate-hike bet heats up

Citing statistics, in the day’s FX market wind-down, the bloc’s common currency euro fell as much as 1.05 per cent against its American peer, remarking its worst intra-session plunge since June, while the US Dollar Index (DXY) gained 0.83 per cent to 94.13.

Besides, the British Pound plunged 0.7 per cent to $1.3698 and the US Dollar added 0.3 per cent against safe-haven Japanese Yen to 113.92 yen per Dollar, while the greenback gained 0.3 per cent to $0.7521 against the Aussies.

Meanwhile, addressing to a strong conflict of opinion between the investors and Central Bank policymakers, a chief market strategist at Bannockburn Global Forex, Marc Chandler said, “A source of volatility could be this discrepancy between what the markets are saying and what the central banks are saying.