Key facts
- US dollar index traded at 102.53, up 0.34%, after hitting a high of 102.94.
- Traders see a 65% chance the Fed will leave rates unchanged at its Oct. 27-28 meeting.
- The euro hit a new 17-month low against the dollar and a 16-month low versus sterling.
The US dollar reached an 18-month high on Wednesday after stronger-than-expected US inflation data briefly revived expectations for a Federal Reserve interest rate hike later this month. The currency later pulled back as investors returned to expecting the Fed to be patient.
The Labor Department's Bureau of Labor Statistics reported that US consumer prices rose sharply in September, driven by surging gasoline costs. The US dollar index was trading at 102.53 late on Wednesday afternoon, up 0.34%, after earlier reaching a high of 102.94.
Traders now see a 65% chance that the Fed will leave rates unchanged at its October 27-28 meeting, compared with 53% a month ago, while pricing in about 79 basis points of tightening by late 2027. Fed Vice Chair for Supervision Michelle Bowman also signaled a wait-and-see approach before raising rates again.
Meanwhile, the euro fell 0.41% to $1.1152, hitting a new 17-month low against the dollar and a fresh 16-month low versus sterling as concerns about France's fiscal health weighed on the single currency.