Dollar gains after US data hardens December Fed hike view

Getty Images

The dollar climbed on Tuesday as a rise in U.S. inflation reinforced expectations that the Federal Reserve will raise interest rates next month.

The dollar touched a 10-month high versus the Swiss franc and edged up slightly against the euro and Japanese yen after a report showed U.S. consumer prices increased in October after two straight months of declines.

Weaker-than-expected industrial output data pared the dollar's gains later in the session, but the greenback overall remained close to multi-month highs against major currencies.

THIS could prevent the Fed from raising rates: Pro

"I think the market has the mindset that there is almost nothing at this stage of the game that is going to dissuade the Fed from going in December," said Lane Newman, director of foreign exchange at ING Capital Markets in New York.

"That's the general consensus. And today's number as anything else has not changed that course of action or expectation from what I can see."

The dollar rose 0.46 percent against the Swiss franc to 1.0142 francs. The euro was down 0.3 percent versus the greenback at $1.0652. Against the , the dollar was up 0.07 percent at 123.36.

Warren Buffett
Warren Buffett: I won't sell anything due to Paris attacks

The dollar index, which measures the greenback against a basket of six currencies, hit a session high of 99.70, its highest since mid-April, and was last up 0.17 percent.

Almost all major currency trading banks are forecasting a decline to parity in the euro against the dollar in the months ahead, but the past two weeks have proved be stickier for the dollar than some expected. Options markets also point to substantial barriers to further gains between current levels and March and April highs around $1.0450.

In a note overnight, CitiFX head of G10 FX strategy, Steven Englander, laid out a handful of risks to current market pricing from Wednesday's Federal Open Market Committee policy meeting minutes.

"The big risk is that the minutes convey that many FOMC members are less convinced on a December hike than the market now thinks and could easily be swayed by market uncertainty or other events to wait another couple of meetings," he said.

In sharp contrast with the Fed, the European Central Bank is considered very likely to expand or extend its quantitative easing program next month, while potentially also cutting deposit rates, which is keeping the euro under pressure.

Sterling bounced back from initial losses to trade up 0.08 percent against the dollar on the day at $1.521.