the u.s. dollar extended its rally friday as investors continue to bet that expansionary spending under donald trump will spur growth. the wsj dollar index, which measures the u.s. currency against 16 others, was recently up 0.2% to 89.61, its highest closing since march. investors have driven the dollar to eight-month highs this week amid optimism that fiscal spending and tax cuts under a trump administration will spur economic growth, higher inflation and lighter regulation. expectations for higher u.s. interest rates have also climbed, as investors bet resurgent growth will allow the federal reserve to tighten borrowing costs. fed-funds futures, a tool traders use to place bets on central-bank policy, show an 81% chance of an interest-rate increase next month, up from 71.5% on thursday, according to cme group data. the dollar<u+2019>s strength is pressuring emerging-market currencies and bonds. as u.s. interest-rates rise, emerging markets become less attractive to yield-seeking investors. the dollar was up 0.7% against the mexican peso and 0.3% against the taiwan dollar. some analysts worry the dollar<u+2019>s rally has gone too far, too fast. <u+201c>the swing from cautious to euphoric on this election has relatively incredible, <u+201c> said brad bechtel, a currency strategist at jefferies group. <u+201d>the problem with how the market is moving now is that it is assuming no mistakes by trump.<u+201d> write to chelsey dulaney at chelsey.dulaney@wsj.com
dollar extends rally on trump spending hopes - wsj
chelsey dulaney