The U.S. dollar index rose sharply on Wednesday, reaching its highest level since July 2020. Consumer prices in the United States have grown the most since 1990, sparking speculation that the Federal Reserve may raise interest rates earlier.

The dollar index was 0.96% to 94.88, after hitting a high of 94.90 in more than 15 months. Although the Fed reiterated its view that the current surge in inflation would be short-lived last week, many investors said that longer-than-expected inflation might force the Fed to raise interest rates.

According to the U.S. Department of Labor, the Consumer Price Index (CPI) rose by 0.9% in October after increasing 0.4% from the previous month in September, representing a year-on-year increase of 6.2%.

Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York, said that "quite alarming" inflation data, including the sharp rise in house prices, suggests that high consumer prices "are unlikely to prove to be temporary."

Independent foreign exchange analyst Erik Bregar said that data reflecting rising inflation made investors speculate that the Fed might raise interest rates early. Supported by the weakening of the gold price and the expiration of the euro against the dollar option, the dollar expanded its gains during the session.

After 13:00 U.S. Eastern time, the U.S. dollar received a further boost. The weak results of the previous 30-year U.S. Treasury tenders pushed up U.S. Treasury yields.

Although the Fed is already reducing its bond purchases, Nancy Davis, founder of Quadratic Capital Management, said that raising interest rates may not be enough to reverse inflation because the Fed cannot control supply chain bottlenecks and fiscal expenditures. If inflation does not recede, the Fed may need to reduce debt purchases and raise interest rates, even more, hurting the stock and bond markets.

The euro fell 0.98% against the U.S. dollar to 1.1479 US dollars and earlier touched 1.1476 US dollars, the lowest since July 21, 2020. At the same time, the pound fell to its lowest level against the U.S. dollar since December 23, as the United Kingdom and the European Union seem to be far from reaching an agreement to resolve the issue of Northern Ireland after Brexit, adding to the pressure on U.S. inflation data.

The pound fell 1.12% against the U.S. dollar in late trading to $1.3405 after the pound fell below Friday's low of $1.3425. The pound was hit hard by the unexpected decision by the Bank of England to keep interest rates unchanged.

The U.S. dollar rose 0.92% against the yen to 113.91. It reached an intraday high of 114.01. It fell to a one-month low on Tuesday.

The Australian dollar fell 0.69% against the U.S. dollar to 0.7327 and earlier hit 0.7324, the lowest since October 13; the New Zealand dollar fell 0.95% against the U.S. dollar to 0.7061.

International news

[THE U.S. October CPI increased by 6.2% year-on-year, exceeding expectations by 5.9%, hitting the highest level in 31 years] The U.S. October CPI increased by 0.9% month-on-month, the most significant increase in four months. This further shows that as U.S. companies pass on high costs to consumers through price increases, the inflationary pressure of the economy continues to rise. In the context of intense demand, companies have been steadily increasing the prices of consumer goods and services due to supply chain bottlenecks and labor shortages pushing up costs. Several economists, including some Fed officials, predict that inflationary pressures will continue into next year.

[EIA report: U.S. commercial crude oil inventories excluding strategic reserves increased by 1.002 million barrels to 435.1 million barrels last week] As of the week of November 5, EIA gasoline inventories decreased by 1.555 million barrels, refined oil inventories decreased by 2.613 million barrels, Okla Crude oil inventories in Cushing, Homer, fell by 34,000 barrels; U.S. domestic crude oil production remained at 11.5 million barrels/day; commercial crude oil, excluding strategic reserves, imported 6.108 million barrels/day last week, a decrease of 64,000 barrels/day from the previous week; Exports increased by 128,000 barrels per day to 3.053 million barrels per day.

[San Francisco Fed President Daly: Inflation is jaw-dropping, and the new crown epidemic is still a problem. It is too early to change our estimate of interest rate hikes. Pay attention to high inflation and unemployment. Inflation is expected to ease, and uncertainty requires us to remain vigilant. It's too early to start asking if we should speed up Taper]

[Biden: Reversing inflation is the top priority, especially in the energy sector] Since taking office, the unemployment rate has fallen by 70%. The number of applicants for unemployment benefits hit the lowest level since the outbreak of the crown epidemic. Rising energy prices are the biggest reason for rising prices. The National Economic Council has been instructed to try to reduce energy costs. The U.S. Federal Trade Commission (FTC) has been asked to crack down on any market manipulation. To support the independence of the Fed, the Fed will monitor inflation and take necessary measures to combat inflation.

[The U.S. Democratic Party presses Biden to consider releasing its strategic reserves of crude oil and does not rule out the ban on oil exports] 11 U.S. Democratic senators, including several senators who are known for their concern about climate change, urged Biden to act quickly, including from The National Strategic Reserve (SPR) released oil, and even adopted more aggressive measures to ban U.S. crude oil exports from solving the problem of rising gasoline prices. Bob McNally, president of the consulting firm Rapidan Energy Group and a former White House official, said that the most likely action is to release oil from the strategic oil reserve. The possibility of imposing an oil export ban is relatively slight because it will disrupt oil flow around the world.