Dollar Surges on Hawkish Fed Outlook and Inflation Concerns

The US dollar surged to near two-month highs on Wednesday due to growing expectations of a near-term Federal Reserve rate hike, as well as concerns over inflation. Since the central bank's recent rate increase to 3.75%-4.00%, several Federal Reserve officials have hinted at more rate increases if inflation doesn't cool down.

On Wednesday, Federal Reserve Governor Michael Barr stated that the US central bank took a crucial step last week to 'recalibrate' short-term borrowing costs to bring down inflation and will likely need to deliver further interest rate hikes. This hawkish tone has given the dollar renewed momentum.

The dollar index rose 0.51% to 101.06 after hitting 101.23, its highest since July 29. Expectations of a Fed rate hike by at least 25 basis points at the October meeting climbed to about 70%, up from roughly 53% before the data release.