U.S. Dollar Appreciates As Fed Rate Hike Bets Escalate

The U.S. dollar climbed against its key counterparts in the Asian session on Wednesday, as U.S. treasury yields rose and hopes for an earlier Fed rate hike intensified after solid data on retail sales and industrial production for October.

Overnight data showed that U.S. retail sales rose 1.7 percent month-on-month in October, above expectation of 1.4 percent.

U.S. industrial production rose 1.6 percent month-on-month in October, beating forecasts for an increase of 0.7 percent following the 1.3 percent drop in September.

The benchmark yield on 10-year note rose 1.64 percent. Yields move inversely to bond prices.

The dollar index climbed to its highest level since July 2020, at 96.24.

The U.S. Federal Reserve should turn more hawkish and accelerate the pace of the QE tapering, if inflationary pressures persist, St Louis Fed President James Bullard said in an interview on Bloomberg TV.

The committee should move in a more hawkish direction in the next couple of meetings to manage the risk of inflation appropriately, Bullard told.

The greenback appreciated to a 1-1/2-month high of 0.9330 against the franc, more than 1-year high of 1.1263 against the euro and a 4-1/2-year high of 114.97 against the yen, following its prior lows of 0.9292, 1.1327 and 114.70, respectively. The greenback is seen finding resistance around 0.95 against the franc, 1.10 against the euro and 116.00 against the yen.

The greenback touched a 1-1/2-month high of 0.7262 against the aussie, after falling to 0.7305 in early trades. The greenback is likely to find resistance around the 0.70 level.

In contrast, the greenback dropped to a 1-week low of 1.3474 against the pound, from an early 5-day high of 1.3396. Next key support for the greenback is seen around the 1.37 level.

The greenback dropped to 0.7010 against the kiwi and 1.2550 against the loonie, off its prior near a 5-week high of 0.6980 and a 5-day high of 1.2586, respectively. The greenback is poised to challenge support around 0.72 against the kiwi and 1.24 against the loonie.

Looking ahead, Eurozone CPI for October and construction output for September are due in the European session.

Canada CPI and U.S. housing starts and building permits, all for October, are scheduled for release in the New York session.