The dollar burst higher on Tuesday after surprisingly strong US CPI data lifted Treasury yields as investors increased their bets on Fed tightening.

The report showed monthly core inflation running at 0.3%, above expectations for 0.2%, and headline at 0.4%, versus the consensus forecast for 0.3%.

The release came after Fed Governor Chris Waller had said that the US central bank ought to consider raising rates by 50bps in December if October monthly CPI inflation came in at 0.3% or higher.

In a similar vein, Dallas Federal Reserve President Lorie Logan said after the CPI report that the US central bank needs to deliver at least two more quarter-percentage-point interest rate increases to bring down inflation, and may need to do so promptly to keep broadening price pressures from getting baked into the economy.

The overall level of troubled borrowing in the US economy rose modestly in the third quarter but did not appear to signal a notable deterioration in credit quality, a report from the Federal Reserve Bank of New York said.

Treasury yields rose 10-19 bps across maturities, led by the front end. The 2s-10s curve flattened by 5.93 bps at the mid rate.

EUR/USD fell fell below its 10- and 21-day moving averages, with a monthly gravestone doji adding to the bearish signals.

The US CPI report unraveled any support sterling derived from hawkish comments delivered by Bank of England Deputy Governor Clare Lombardelli, who had said conditions for persistent inflation in Britain are crystallizing.

AUD/USD struck an eight-month low with RSIs indicating downward momentum.

USD/JPY gains left it eyeing the 159 level, with expectations that 160 could be next.

The S&P 500 was trading down 0.64% in the New York afternoon as the increased US rate-hike expectations hurt risk appetite.

WTI fell 0.96% and Brent weakened another 1.17%, adding to recent losses.

Copper was down 1.42%, gold slid 2.68% and silver skidded 3.85% lower.

Heading toward the close: EUR/USD-0.53%, USD/JPY +0.57%, GBP/USD -0.76%, AUD/USD -0.93%, DXY +0.6%, EUR/JPY -0.03%, GBP/JPY -0.16%, AUD/JPY -0.37%.(Burton Frierson)