FOREX-Dollar climbs as U.S. inflation surge fuels rate hike speculation

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 (New throughout, updates prices, market activity and comments)
    By Julien Ponthus and Sinéad Carew
    LONDON/NEW YORK, Nov 10 (Businesshala) - The dollar index jumped
sharply on Wednesday, with the euro hitting a 16-month low
against the greenback, after U.S. consumer prices surged to
their highest rate since 1990, fueling speculation that the
Federal Reserve may raise interest rates sooner than expected. 
     The consumer price index rose 0.9% last month after gaining
0.4% in September and in the 12 months through October, the
consumer price index accelerated 6.2%. the U.S. Labor Department
said on Wednesday, while analysts expected on average the rise
to be limited to 5.8%.
    While the Fed last week restated its belief that the current
 inflation surge would be short-lived, many investors worry that
underestimating price increases could prove to be a costly
policy mistake. 
    At 1140 EDT (1640 GMT), the dollar index, which
measures the greenback against six major currencies, was up
0.60% at 94.5230 after reaching a high of 94.609, just below its
13 and half-month high of 94.634 reached on Nov. 5. 
    While the Federal Reserve is already tapering its bond
buying, rising inflation may force it to hike interest rates
sooner than expected said Nancy Davis, founder of Quadratic
Capital Management in Greenwich, Connecticut. 
    But "rate hikes might not be enough to reverse inflation
because the sources of inflation involve supply chain
bottlenecks and fiscal spending, which are two areas that the
Federal Reserve doesn't control” she said.
    “If inflation doesn't subside, the Federal Reserve may need
to taper at a more substantial rate and hike interest rates,
which could hurt stocks and bonds,” said Davis. 
    Against Japan's yen the greenback was last up
0.85% to 113.86 yen after touching a session high of 113.940. On
Tuesday the dollar had hit a month-low against the yen.
    Greg Anderson, global head of foreign exchange strategy at
BMO Capital Markets in New York said the "pretty shocking"
inflation data including sharp housing price increases suggest
that high consumer prices are "not likely to prove transitory." 
    The euro was last down 0.61% at $1.1523 after
earlier touching $1.15115, its lowest level since July 21, 2020.
    Hammered last week after the Bank of England's surprise
decision to keep rates unchanged, sterling was last
down 0.59% at $1.3482, but still holding above Friday's more
than one-month low of $1.3425.  
    The Australian dollar was down 0.24% against the greenback
at $0.7363 after earlier hitting $0.7341, its lowest
level since Oct. 13. The New Zealand dollar was down 0.55%
against the U.S. dollar at $0.7091.
    "What do these numbers say? Simply that inflation is going
to be long-lasting and structural inflation has picked up
speed," said Peter Cardillo, chief market economist at Spartan
Capital Securities In New York. 
    "The bottom line is that this is going to be a real
challenge for the Fed in the coming months and suggests that
inflation has not peaked," he added.
    Data had also shown on Tuesday that U.S. producer prices
increased solidly in October, driven by surging costs for
gasoline and motor vehicle retailing, suggesting that high
inflation could persist. 
    In cryptocurrencies, bitcoin jumped to an
all-time high of $69,000.00 after the U.S. inflation data and
was last up 2.5% at $68,632.87. 

    ========================================================
    Currency bid prices at 11:40AM (1640 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change                   
                                              Session                                             
 Dollar index                 94.5230        93.9720     +0.60%         5.048%        +94.6090    +93.9620
 Euro/Dollar                  $1.1523        $1.1596     -0.61%         -5.68%        +$1.1595    +$1.1512
 Dollar/Yen                   113.8600       112.8800    +0.85%         +10.18%       +113.9400   +112.7800
 Euro/Yen                     131.21         130.87      +0.26%         +3.38%        +131.4100   +130.6600
 Dollar/Swiss                 0.9159         0.9112      +0.53%         +3.54%        +0.9168     +0.9110
 Sterling/Dollar              $1.3482        $1.3560     -0.59%         -1.33%        +$1.3565    +$1.3469
 Dollar/Canadian              1.2439         1.2436      +0.03%         -2.31%        +1.2458     +1.2387
 Aussie/Dollar                $0.7363        $0.7380     -0.24%         -4.30%        +$0.7393    +$0.7341
 Euro/Swiss                   1.0553         1.0560      -0.07%         -2.35%        +1.0571     +1.0547
 Euro/Sterling                0.8544         0.8551      -0.08%         -4.40%        +0.8560     +0.8532
 NZ                           $0.7091        $0.7130     -0.55%         -1.27%        +$0.7132    +$0.7077
 Dollar/Dollar                                                                                    
 Dollar/Norway                8.5895         8.5025      +0.93%         -0.06%        +8.6000     +8.5215
 Euro/Norway                  9.8995         9.8640      +0.36%         -5.43%        +9.9080     +9.8519
 Dollar/Sweden                8.6668         8.5735      +0.54%         +5.74%        +8.6705     +8.5738
 Euro/Sweden                  9.9875         9.9334      +0.54%         -0.88%        +9.9883     +9.9400
 
    
 (Reporting by Sinéad Carew and Stephen Culp in New York, Julien
Ponthus and Saikat Chatterjee in London; Kevin Buckland in Tokyo
Editing by Emelia Sithole-Matarise, Alex Richardson and Alison
Williams and David Gregorio)
  
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