The dollar rose today, buoyed by remarks from Christopher Waller, a member of the Federal Reserve Board of Governors and a permanent voting member of the Federal Open Market Committee, who voiced support for the Fed raising interest rates. As of 8:10 p.m. Thailand time, the dollar index was up 0.14% at 102.28, while the dollar gained 0.09% to 1.120 against the euro and strengthened 0.26% to 158.27 yen. Waller said the Fed may need to raise rates further to bring inflation back to its 2% target if economic data continue to come in as expected, and that tighter monetary policy may be needed to keep prices stable. In addition, the Fed's meeting minutes signaled that policymakers see inflation as the biggest risk to the U.S. economic outlook. Investors increased their bets that the Fed will hold rates steady at its October meeting after the Institute for Supply Management's U.S. services index fell to 54.9 in September, below the expected 55.2 and down from 55.4 in August. Most recently, the CME Group's FedWatch Tool indicated that investors assign an 80.6% probability to the Fed holding rates at 3.75-4.00% at its October meeting, and a 70.2% probability to the Fed raising rates by 0.25% to 4.00-4.25% at its December meeting. The market is watching next week's releases of the consumer price index and producer price index ahead of the Fed's monetary policy meeting on October 27-28.
Waller backs further Fed rate hikes and minutes flag inflation as top risk, pushing the expected policy rate higher.
Hawkish Fed rate-hike bets and inflation-risk minutes lift Treasury yields, pushing the 10Y yield up (bond price down).
