the dollar surged to its highest level in almost a year monday, buoyed by expectations of a rate increase in december and ramped up fiscal stimulus under a new presidential administration. the ice dollar index, which gauges the u.s. currency against a basket of six others, was recently up 1% to 100.01, its highest level since december 3. with the u.s. economy showing evidence of steady growth and election uncertainty now in the rearview mirror, investors are increasingly convinced that the federal reserve is set to raise interest rates next month. federal-funds futures, used to bet on central bank policy, on monday showed that investors assigned a 85.8% likelihood of a rate increase in december, up from 81.1% a day ago. expectations of higher rates tend to buoy the dollar, as rising borrowing costs make the currency more attractive to investors seeking yield. at the same time, some investors also believe that the administration of president-elect donald trump is in a strong position to put forward policies that could boost growth in the u.s., another reason to bet on the dollar. faster growth could also help spark inflation and force the fed to tighten at a faster pace, increasing the appeal of the dollar further, said omer esiner, chief market analyst at commonwealth foreign exchange. <u+201c>this is an absolutely surprising rally,<u+201d> mr. esiner said. <u+201c>this time last week most people were not calling for this type of move.<u+201d> the dollar was recently up 1.7% at <u+00a5>108.44 against the japanese yen. the euro was down 1.1% at $1.0739. the dollar was up 1.2% against the brazilian real at 3.43 and gained 0.4% against the russian ruble to 66.03. write to ira iosebashvili at ira.iosebashvili@wsj.com
dollar surges on rate rise expectations - wsj
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