For Fiddler to capture traffic from localhost on local IIS, there are 3 steps (It worked on my computer):
Click Tools > Fiddler Options. Ensure Allow remote clients to connect is checked. Close Fiddler.
Create a new DWORD named ReverseProxyForPort inside KEY_CURRENT_USER\SOFTWARE\Microsoft\Fiddler2.
Set the DWORD to port 80 (choose decimal here). Restart Fiddler.
Add port 8888 to the addresses defined in your client. For example localhost:8888/MyService/WebAPI/v1/