The dollar index, which measures the dollar’s strength against a basket of six currencies, was edging near a one-year high yesterday due to rising treasury yields. The greenback also strengthened because of expectations that the Federal Reserve will begin to taper monetary policy after its November meeting. This could lead to an interest rate hike next year.
Rising energy costs are also solidifying predictions of tapering, as these are expected to push inflation up.
The dollar has weakened slightly this morning from yesterday’s highs ahead of the latest US inflation data. It will be released this afternoon and the markets will be watching closely.
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