Investing.com - The U.S. dollar rose against a basket of the other major currencies on Tuesday after Federal Reserve Chair Janet Yellen said in congressional testimony that the U.S. central bank would consider raising interest rates at its upcoming meetings.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.36% to 101.36, the most since January 11.
Yellen said a rate increase would be appropriate at one of the Fed’s forthcoming meetings if the economy evolves in line with expectations, adding that waiting too long to remove monetary policy accommodation would be unwise.
She also said changes to fiscal policy under the Trump administration could affect the economic outlook, but it was too early to know how this would unfold.
According to Investing.com's Fed Rate Monitor Tool less than 20% of traders expect the Fed to raise interest rates at its next meeting in March. The chance of a June increase is seen at just below 50%.
The Fed has indicated that it could hike rates three times this year.
Separately, data on Tuesday showed that U.S. producer prices rose at the fastest rate in four years in January as energy costs surged, but the stronger dollar meant that underlying inflation remained tame.
The producer price index rose 0.6% in January, the Labor Department said.
The dollar had come under pressure earlier after President Donald Trump's national security adviser Michael Flynn resigned late Monday amid allegations that he discussed the possibility of lifting sanctions with Russian officials before Trump’s inauguration.
The dollar rose to two-week highs against the yen, with USD/JPY up 0.57% to 114.36.
Japanese Prime Minister Shinzo Abe said Tuesday that he agreed with Donald Trump at a weekend summit that currency issues should be left for finance leaders of each country to discuss.
The euro fell to one-month lows, with EUR/USD down 0.31% to 1.0566.
Markets were watching events in Greece as efforts continued to reach a deal on its next bailout payment before February 20th.
The single currency also remained under pressure amid fears over the possibility of a Brexit or Trump-style shock result in France’s upcoming presidential election.
Elsewhere, sterling remained lower after the latest UK inflation report showed that while the cost of living rose in January to the highest since June 2014 the increase disappointed expectations for an even sharper rise.
GBP/USD touched lows of 1.2445 and was last at 1.2455, off 0.57% for the day.