The greenback soar near a 3-and-a-half-week high on Wednesday following Federal Reserve Chair Janet Yellen’s signal of a faster pace of U.S. interest rate hikes.
Even though she expressed caution amid uncertainties over economic policies under President Donald Trump’s administration, Yellen told the U.S. senate Banking Committee that the central bank will likely need to increase interest rates at one of its upcoming meetings.
The dollar index, which gauges the dollar against other major currencies, went up 0.1 percent at 101.26. The index rose to its highest since January 20 on Tuesday after Yellen’s remarks.
Market strategist at Sumitomo Mitsui Trust Bank, Ayako Sera said “Investors didn't expect Yellen to be that hawkish, so the dollar gained.”
Sera added “There are no big factors preventing the Fed from raising rates in March. Unless the emerging markets become volatile or the U.S. economic data shows weakness, the March rate hike is highly plausible.”
Senior currency strategist at Brown Brothers Harriman, Masashi Murata said “Yellen doesn't seem to have changed her stance on rate hikes. Bids on a March rate hike still remains to be a minority.”
"The dollar/yen was weak last week, so investors bought back the dollar on Yellen's comments," Murata added.
The dollar was trading at 114.23 yen, close to the two-week peak of 114.49 yen reached on Tuesday. The dollar recovered from last week’s 10-week low of 111.59.
The euro last traded down 0.1 percent at $1.0572, right near a one-month low of $1.0559 touched on Tuesday due to political risk and disappointing regional economic data.