Dollar Gains Amid US Inflation Data and Fed Rate-Hike Bets

The US dollar strengthened against several major currencies on Friday after fresh inflation data showed consumer prices rising in August.

According to U.S. Labor Department data, the consumer price index rose 0.4% in August, accelerating from a 0.1% increase in July. Core consumer prices rose 2.4% year on year, compared with 2.5% in July.

The dollar initially gained broadly after the data reinforced expectations for tighter monetary policy, but fragile investor sentiment amid escalating tensions in the Middle East and higher oil prices limited its advance.

Markets are now pricing in roughly an 86% probability of a 25-basis-point rate increase at the Federal Reserve's upcoming meeting, up from about 72% a day earlier, according to the CME's FedWatch tool.