FOREX-Dollar gains traction as Fed speakers warn of risks from inflation

The ​dollar extended gains in Asian trade on Wednesday ​to approach a two-week high, after ‌a hotter-than-expected ​inflation report and hawkish comments from Federal Reserve officials fuelled bets the US central bank will raise rates next month. The US dollar index, which measures ‌the greenback's strength against a basket of six currencies, was 0.1% higher at 102.30, closing in on its highest since October 29.

The gauge traded up 0.5% on Tuesday after data showed US consumer prices increased by more ‌than expected in October amid higher costs for food and accommodation. "The rates market isn't simply pricing another ‌hike," said Chris Weston, head of research at Pepperstone Group Ltd in Melbourne. "It's questioning how restrictive US monetary policy may ultimately need to become, and that's a far more consequential debate for risk assets."

The dollar held onto its gains against its major peers in Asian ⁠trade. ​The euro and the British ⁠pound were flat at $1.1163 and $1.3346, respectively. Against the yen , the US dollar was unchanged at 158.82 yen. The Australian dollar was up ⁠0.1% at $0.6875, edging back from a seven-month low, while the New Zealand dollar was flat at $0.5606. Comments from voting members of ​the Federal Reserve's rate-setting committee signalling unease over high inflation have firmed expectations for further rate hikes, ⁠prompting traders to all but abandon bets that the US central bank will stand pat at its next policy meeting, which concludes on December ⁠9.

Fed ​funds futures now imply an 85% chance of a 25-basis-point rate hike next month, according to CME Group's FedWatch tool. Traders have now fully priced out the possibility of a pause, where they saw ⁠a 16% possibility a day ago. Instead, markets now assign a 15% chance of a larger 50-basis-point move, and ⁠better-than-even odds to a ⁠second hike in January. The yield on the US 10-year Treasury bond was up 13.8 basis points at 4.996%.

In cryptocurrencies, bitcoin was 0.1% lower at $73,712.34, nearing a three-month ‌low, while ‌ether climbed 0.6% to $2,067.24.