U.S. dollar hits 4 - 1 2 year high as Fed hikes

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U.S. dollar hits 4 - 1 2 year high as Fed hikes

LONDON, November 17, Reuters -- The U.S. dollar held above 4 -- 1 2 year highs against the yen and was poised to make fresh gains against the euro on Wednesday after robust U.S. data and hawkish comments from Fed policymakers boosted expectations of a rate hike as early as mid- 2022.

The US retail sales rose more than expected in October, building on momentum from last week when consumer prices went up at the highest level since 1990, according to a report released Tuesday.

Money markets are pricing in a high probability of a Fed rate increase in June, followed by another in November. CME data shows a 50% probability of a 25 bps rate hike by July 2022.

Antje Praefcke, FX strategist at Commerzbank, said the market believes that the key rate will be hiked in the second half of next year. The dollar is still a 'buy on dips' short-term. The dollar index, which measures the currency against six rivals, rose by 0.1% to 96.053 after earlier touching 96.266 for the first time since July last year.

The euro dropped abruptly to $1.1263 for the first time since July 2020 before trading 0.2% lower at $1.1308.

St. Louis Fed President James Bullard said on Tuesday that the central bank should tack in a more hawkish direction over its next couple of meetings in case inflation doesn't begin to sluggish.

The pound went to a one week high against the U.S. dollar and a 21 month high against the euro after data showed British inflation reached a 10 year high in October, boosting expectations of a rate hike as early as next month.

After dipping below that level for the first time this month, the price of cryptocurrencies traded south of $60,000. It was at a record $69,000 last Wednesday.