The U.S. dollar rallied to a seven month high Friday as investors raise bets on a potential Federal Reserve interest rate hike in December.
The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) rose 0.4% Friday to its highest level since early march.
Strengthening the U.S. dollar, investors added to bets that the Fed will hike interest rates on strong economic data and upbeat commentary from policy makers, reports Chelsey Dulaney for the Wall Street Journal.
Looking at the Fed-funds futures, options traders were pricing in a 70% chance of a rate hike in December, compared to a 50% chance a month ago.
A higher interest rate typically supports the U.S. dollar since the currency becomes more attractive to foreign-seeking investors and diminishes the supply of money sloshing around in the markets.
Further supporting the U.S. dollar, traders dumped the euro currency after the European Central Bank met Thursday and hinted that stimulus will remain in the Eurozone. Traders were previously concerned that ECB President Mario Draghi would begin tapering the quantitative easing program.