U.S. Dollar Extends Rally On Fed Rate Hike Bets

(RTTNews) - The U.S. dollar extended its early strength against other major currencies in the Asian session on Thursday, on rising Federal Reserve (Fed) rate-hike expectations, supported by high U.S. consumer inflation data.

Additionally, uncertainty in the Middle East supported the safe-haven dollar, which is thought to be a major factor driving the commodity's decline.

Prospects for additional Fed policy tightening were supported by the October U.S. Consumer Price Index (CPI) report, which was published earlier this week. Markets predicted that the U.S. central bank will raise borrowing prices once more in December, were confirmed by hawkish remarks made by a number of powerful FOMC members.

Fed Governor Christopher Waller indicated that a 50-basis-point hike in December may be necessary, while Dallas Fed President Lorie Logan supported at least two additional 25-basis-point increases to address persistent inflationary pressures.

According to the CME FedWatch Tool, markets are fully pricing in a 25-bps rate hike next month, with the probability of a larger 50-basis-point move currently standing at 11 percent.

Amidst the U.S.-Iran conflict over the Strait of Hormuz, where both sides have recently attacked islands in the waterway, the geopolitical risk premium is still in effect.

According to reports, Tehran attacked ship navigation equipment on the Omani island of Didamar, which is situated near the Persian Gulf's entrance, while US forces conducted a series of strikes on Iran's Qeshm Island.

Furthermore, according to Brigadier General Kioumars Heidari, Deputy Chief of Staff of the Iranian Armed Forces, Tehran has closed the important canal and won't open it unless the revolutionary leader gives the order.

In the Asian trading today, the U.S. dollar rose to a 1-1/2-year high of 1.1066 against the euro and a 4-week high of 1.3250 against the pound, from yesterday's closing quotes of 1.1090 and 1.3282, respectively. If the greenback extends its uptrend, it is likely to find resistance around 1.09 against the euro and 1.31 against the pound.

Against the yen and the Swiss franc, the greenback edged up to 159.88 and 0.8337 from Wednesday's closing quotes of 159.78 and 0.8333, respectively. The greenback may test resistance around 164.00 against the yen and 0.85 against the franc.

Against Australia, the New Zealand and the Canadian dollars, the greenback climbed to nearly a 1-year high of 0.6823, a 6-day high of 0.5544 and nearly a 1-month high of 1.4265 from Wednesday's closing quotes of 0.6847, 0.5570 and 1.4253, respectively. On the upside, 0.67 against the aussie, 0.54 against the kiwi and 1.44 against the loonie are seen as the next support levels for the greenback.

Looking ahead, U.S. weekly jobless claims data, U.S. existing home sales for October, U.S. EIA crude oil data and U.S. monthly budget statement for October are slated for release in the New York session.