25-Oct (Bloomberg) — The dollar rose to a seven-month high as traders ratcheted up bets on a Federal Reserve interest-rate increase by year-end.
The greenback appreciated against its major counterparts for the fourth straight day and extended its October gains. The probability of a Fed interest-rate increase by December rose to 74 percent, the highest since June, futures data compiled by Bloomberg show.
The advance suggests that currency traders have yet to fully price in the prospect of higher U.S. rates in coming months, signaling that the dollar may have room to extend gains that began in August amid evidence of faster economic growth and accelerating inflation. Chicago Fed President Charles Evans said Monday that if the economy continues to grow in line with his forecast, it may be appropriate to raise rates three times by the end of 2017.
“It’s a fairly straightforward Fed-expectations move,” said Adam Cole, head of global foreign-exchange strategy at Royal Bank of Canada in London.