Dollar rises to seven-month peak as U.S. data bolsters rate hike view

By Dion Rabouin and Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) - The dollar climbed to a seven-month peak on Tuesday, as a rise in U.S. inflation reinforced expectations that the Federal Reserve will raise interest rates next month.

The dollar touched a 10-month high versus the Swiss franc and edged up against the euro and yen after a report showed U.S. consumer prices increased in October after two straight months of declines.

Weaker-than-expected industrial output data pared the dollar's gains later in the session, but the greenback overall remained close to multi-month highs against major currencies.

"I think the market has the mindset that there is almost nothing at this stage of the game that is going to dissuade the Fed from going in December," said Lane Newman, director of foreign exchange at ING Capital Markets in New York.

"That's the general consensus. And today's number as anything else has not changed that course of action or expectation from what I can see."

The Fed is scheduled to release on Wednesday the minutes of the October monetary policy meeting, which should shed light on the some of the changes in the U.S. central bank's statement.

Brian Daingerfield, currency strategist, at RBS in Stamford, Connecticut said the Fed's monetary policy committee "may signal greater confidence in the global outlook after policy easing by the People's Bank of China and a strong signal of new accommodation from the European Central Bank."

In late trading, the dollar index <.DXY>, which measures the greenback against a basket of six currencies, rose to a seven-month peak of 99.745. It last traded up 0.2 percent at 99.633.

The greenback rose 0.5 percent against the Swiss franc to 1.0143 francs . The euro was down 0.4 percent versus the greenback at $1.0643. Against the yen, the dollar was up 0.2 percent at 123.41 .

Almost all major currency trading banks are forecasting a decline to parity in the euro against the dollar in the months ahead, but the past two weeks have proved be stickier for the dollar than some expected. Options markets also point to substantial barriers to further gains between current levels and March and April highs around $1.0450.

"The big risk is that the minutes convey that many FOMC members are less convinced on a December hike than the market now thinks and could easily be swayed by market uncertainty or other events to wait another couple of meetings, said CitiFX head of G10 FX strategy, Steven Englander, in a research note.

(Reporting by Dion Rabouin; Editing by W Simon and Diane Craft)

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