US inflation rose at its fastest pace in two years during November, spurred on by higher energy prices, according to figures from the Labor Department.
Consumer prices rose 0.8% in November from October, above market forecasts.
The figures come as US and UK central banks have been cutting interest rates to bolster weakening economic growth.
The higher than expected inflation figure saw the dollar post its biggest one-day rise against the euro in more than three years.
This is because traders now expect the Federal Reserve to delay any further rate cuts.
By late Friday afternoon trading in New York, the euro was down 1.5% to $1.4412 against the dollar.
This is the strongest the dollar has been against the single European currency since October.
"The fear is that inflation will become the bigger concern," said John Forelli of Independence Investment in Boston. "It would be a lot easier to carry out their plans if inflation was not a concern."
US shares fell on concerns that the Federal Reserve would now not cut interest rates. That expectation helped strengthen the US dollar as investors looked for assets in currencies that offered higher returns.
'Dilemma'
Consumer prices rose 0.8% in November from October, above market forecasts.
The figures come as US and UK central banks have been cutting interest rates to bolster weakening economic growth.
The higher than expected inflation figure saw the dollar post its biggest one-day rise against the euro in more than three years.
This is because traders now expect the Federal Reserve to delay any further rate cuts.
By late Friday afternoon trading in New York, the euro was down 1.5% to $1.4412 against the dollar.
This is the strongest the dollar has been against the single European currency since October.
"The fear is that inflation will become the bigger concern," said John Forelli of Independence Investment in Boston. "It would be a lot easier to carry out their plans if inflation was not a concern."
US shares fell on concerns that the Federal Reserve would now not cut interest rates. That expectation helped strengthen the US dollar as investors looked for assets in currencies that offered higher returns.
'Dilemma'
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