Dollar Returns to Gains as Traders Expect Accelerated Rate Hikes

The dollar did not stay down for long, as the US currency already went higher on Tuesday. A surge in US existing home sales during October boosted traders’ expectations that the Federal Reserve might decide multiple interest rate increases in 2017 following a predicted rate hike in December.

After a small selloff on Monday, which was caused by traders’ reevaluation of the dollar’s recent gains, the US currency returned to climb again on Tuesday. The greenback continued to be supported by the anticipated fiscal spending boost that the US President-elect Donald Trump promised to bring to the economy, which will raise inflation and lift interest rates.

A report released by the National Association of Realtors today showed that existing home sales rose by 2% to 5.60 million in October from 5.49 million in September, and by 5.9% compared to October 2015. The increase marks the biggest in data since February 2007, when existing home sales rose by 5.79 million. The data also showed that the median existing home price climbed by 6% to $232,200 in October from one year earlier.

The greenback is expected to continue rising as more signals of rising inflation emerge. The report added to mounting evidence that inflation will be heading upward, which will prompt the Federal Open Market Committee to accelerate its pace of rate hikes. The committee’s next meeting takes place on December 14.

EUR/USD traded at 1.0624 as of 20:34 GMT after touching 1.0583 at 16:00 GMT, its lowest level for the day. The pair opened trading today at 1.0623.

The Dollar Index, which measures the performance of the US currency against its major peers, touched 101.06 at 20:14 GMT from 101.05 on Monday.

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