Fed chair Janet Yellen stated on Wednesday that an increase in short-term interest rates would “become appropriate relatively soon.”
“The dollar is rampant,” Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA, told Bloomberg. “It’s just this assumption, and for now it still is an assumption, that the U.S. is going to reflate next year from fiscal policy. Yellen’s comments yesterday probably helped the dollar.”
Further supporting the case for a rate hike, the weekly jobless claims declined to a four-decade low and U.S. housing starts reached a nine-year high. Options traders are now betting on a 98% chance the Fed could hike rates in December, up from a 80% chance a week ago and less than 65% a month earlier.
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PowerShares DB U.S. Dollar Index Bullish Fund