USD climbs as inflation stirring rate hike

The dollar index jumped sharply on Wednesday, with the euro hitting a 16-month low against the U. S. currency, after U.S. consumer prices surged to their highest rate since 1990, fueling speculation that Fed may raise interest rates sooner than expected.

The consumer price index rose 0.9% last month after gaining 0.4% in September and accelerated 6.2%. the U.S. Labor Department said on Wednesday, while analysts expected on average the rise to be limited to 5.8%.

The dollar index was up by 0.60% at 94.5230 after reaching a high of 94.609, just below its 13 and half-month high of 94.634 reached on 5 November.

While Fed is already tapering its bond buying, rising inflation may force it to hike interest rates sooner than expected but rate hikes might not be enough to reverse inflation because the sources of inflation involve supply chain bottlenecks and fiscal spending, which are two areas that Fed does not control.