The dollar hit its 2021 peaks, against euro and sterling, and surges on the yen.
SYDNEY, Nov 11 (Reuters) - The dollar hit a 2021 high against sterling and the euro on Thursday, while the yen was smarted from its sharpestdrubbing in a month, after the hottest U.S. inflation reading in a generation fanned bets on rate hikes.
The Federal Reserve could respond by lifting interest rates faster than in Europe and Japan, according to data, in the U.S. consumer prices grew at their fastest annual pace since 1990 last month.
The euro was pummelled as the European Central Bank is lagging on policy tightening and it stood up to $1.1465 on Thursday, its lowest since July 2020. It is without major chart support until $1.12.
The pound was also down at a 11 month low on Thursday, at $1.3393. The Australian and New Zealand dollars made a two-month troughs, which resulted in a sharp reversal of recent gains to 114.15 per dollar.
The market is still showing a degree of credibility for the Fed that they don't will allow high inflation to continue indefinitely, said National Australia BankAustralia Bank's head of FX strategy, Ray Attrill.
He said a dollar index move above 95 might prompt investors to get out of the way of a rising greenback if other central banks are considering similar moves.
It's a big level technically and if we can break up through that, there will be more people throwing in the towel. The index went up to 95002 on Thursday.
The dollar has suffered from the dollar's broad rise, with the EM currency index of MSCI's second highest drop in two months.
The difference between five-year U.S. yields and yields in a similar tenor in Japan and Germany has opened up the difference between five-year U.S. yields and yields at the same tenor in favour of Treasuries since early 2020.
The timing of the report in Australia showed a rise in unemployment, though the timing of the report - in the midst of the lifting of epidemic lockdowns of big cities - made the figures difficult to interpret.
The Fed's thinking and the inflation jump which is a factor in the mood, could increase the worry about the further gains, which is likely to be based on clues about the Fed's thinking, and on whether the inflation jump would give a larger weight on the mood.
We're in a stand-off from an FX stand point, said Alan Ruskin, the Deutsche Bank strategist.
When Fed won't respond to high inflation, it is dollar negative, if the Fed brings forward tightening it isUSD positive. The dollar is stuck between these two worlds right now. The British growth data will be available later in the day.