Inflation in Zimbabwe is so bad… (That’s when you say, ‘How bad is it?’)… It’s so bad that they are going to introduce a new 100 billion dollar note, that’s only worth $125!

In the currency market, the dollar edged higher against the euro. Late Friday, the euro was trading at $1.5841 vs. $1.5859 on Thursday.

In the currency market, the dollar rallied against the euro. Late Wednesday, the euro was trading at $1.5823 vs. $1.5899 on Tuesday.

Traders were scrutinizing the release of the minutes from the last Fed meeting, searching for the future direction of interest rates, and apparently decided from the mixed signals that the Fed is about to turn hawkish on inflation.

As Dow Jones Marketwatch reported: “Some members said the Fed had aggressively cut rates to 2% to guard against downside risks to growth and now that these risks had ‘diminished’ that ‘some firming in policy would be appropriate very soon.’

“But other FOMC members said financial conditions were still too fragile and borrowing costs were higher for consumers than before the Fed starting cutting rates last fall.

“The minutes show a clear divide and intense debate between one camp that favored rate hikes sooner rather than later and others who believed the outlook was still uncertain at best.”

Those who think the Fed will have to raise rates got support from the day’s most important numbers. The Labor Department reported that the consumer price index rose by 1.1% in June. It was the biggest monthly increase since Hurricane Katrina nearly three years ago, and well above economists’ expectations for a 0.8% gain.

CPI was led higher by a 6.6% jump in energy prices and a 0.8% increase in food prices.

“The Fed will face an ongoing inflation threat that will eventually require a policy response that we continue to expect before year-end,” wrote Michael Englund, chief economist for Action Economics.

Source: Dollar Shows Strength, Traders Banking on Fed Reversing Rate Policy

The Daily Reckoning’s currency expert Chuck Butler says the dollar is being taken to the woodshed. The greenback is losing ground against all major currencies as the credit crisis continues to wreak havoc in the U.S economy. Chuck says disappointing inflation or retail sales data this week will send the dollar to new depths…

In the currency market, the dollar lost much of its early gains against the euro, but managed to hang on in positive territory. Late Monday, the euro was trading at $1.5904 vs. $1.5931 on Friday.