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U.S. Dollar Hits Strongest Point in 16 Months as Inflation Booms

The dollar hit its strongest point against the euro since July 2020.

The U.S. dollar  (DXY)  on Thursday rose to a 16-month high to touch 95.197, a day after data showed inflation in the world's biggest economy grew at its fastest pace since 1990.

The dollar closed Thursday's session at 94.85, rising 0.32% in after hours. The euro trailed 0.28% at $1.145 in after hours trading. 

The euro closed Thursday at $1.1483. At one point during the session, the currency of the European Union fell to its weakest since July 2020 to $1.145.

The Pound Sterling "also touched its lowest point against the dollar since December 2020," the Financial Times reported.

“Inflation in and of itself isn’t always a bad thing for the equity market,” Don Townswick, director of equity strategies at institutional asset manager Conning told Reuters. “Typically tightening happens when the economy is doing really well, so merely the prospect of some higher interest rates isn’t a problem.”

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Stocks were mostly higher Thursday as investors bet on the Federal Reserve tightening monetary policy in the short term.

The Dow Jones Industrial Average finished down 158 points, or 0.44%, to 35,921, while the S&P 500 advanced 0.06% and the Nasdaq climbed 0.52%.

The Bureau of Labor Statistics on Wednesday released headline CPI for the month of October was estimated to have risen 6.2% from last year, up from the 5.4% pace in September and the fastest rate since 1990. 

On a monthly basis, inflation was up 0.9%, the BLS said, with both tallies coming in well ahead of Wall Street forecasts.

Last week the U.S. central bank said it will begin slowing the pace of its $120 billion in monthly bond purchases later this month.

Fed chair Jerome Powell, however, said the Fed will be "patient" in terms of interest rate hikes, but would not hesitate to act if a response against faster inflation were needed.