Dollar jumps as Fed interest rate hike seen nearer

"The main theme doing the rounds this week was the increasing hawkishness of Fed members, which clearly pointed to a rate hike in March", said TreasuryOne currency dealer Andre Botha.

Elsewhere in the speech, she indicated that the economy was meeting the Fed's expectations.

With unemployment at 4.8 percent and inflation near the Fed's ideal of 2 percent, that likely gives Fed officials the room to raise rates, bringing them closer to historical averages.

The FOMC, which forms Fed policy, will meet March 14-15.

William Dudley, president of the New York Fed, said this week that the argument for another rate rise to follow last December's was becoming " more compelling".

"I think the case for a rate increase in March has come together, and I think it's on the table for discussion", Powell said in an interview on CNBC Thursday.

"There's a lot of positive news now priced into the market, and I think we'll probably see some profit-taking, so I think we'll probably see the dollar weaken from here", said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in NY. "Assuming continued progress, it will likely be appropriate soon to remove additional accommodation, continuing on a gradual path".

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"But the dollar's downside was limited as Yellen and Fischer are expected to reiterate that an interest rate increase is imminent", an official at a major Japanese bank said. Investors now think there's about a 60% chance of a hike'.

Trump offered little detail on his plans for fiscal or trade policies in his address to US Congress on Tuesday and US stock futures traded higher in Asia - as did odds in money markets on a rate move this month. The Fed has penciled in three rate hikes this year.

The shift in expectations has sent Treasury yields soaring, since investors now see a prospect of higher inflation that would erode the real interest payouts of bonds. In addition to a stronger U.S. dollar, United States bond yields also increased over night due to the hype around a Fed move.

Since mid-2016, however, the USA economy has shown more resilience, and risks from overseas have diminished, Yellen said.

In her speech, Yellen said the prospects for continued moderate growth were encouraging and risks from overseas appear to have receded.

"Fed speakers trump Trump", Richard McGuire, the head of rates strategy at Rabobank International in London, wrote in a note, Bloomberg reported. Zandi says the USA economy is on "solid ground" and raising rates now makes it less likely that inflation will spike and require more drastic action in the future.

Inflation data on Wednesday showed consumer prices inJanuary posted their biggest monthly gain in four years and leftthe 12-month increase in prices at 1.9 percent, just below theFed's 2 percent target. That means Yellen and her compatriots have a delicate balancing act to pull off, he said.