Investing.com - The dollar rose to the day’s highs against a currency basket on Tuesday after Federal Reserve Chairman Jerome Powell said strong growth and stable inflation should keep the central bank on track to keep gradually raising interest rates.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.31% to 94.56 by 10:54 AM ET (14:54 GMT), pulling away from an earlier low of 94.12.
Fed officials believe, for now, that the best way forward is to keep gradually hiking rates in order to keep inflation close to its target amid a strong U.S. labor market, Powell said in prepared testimony before the Senate Banking Committee.
He also cautioned that it is “difficult to predict’’ how trade tensions will impact on the economic outlook, adding that the risks of a weaker or stronger economy are “roughly balanced’’.
On Monday, the International Monetary Fund warned that escalating trade tensions are threatening to derail the economic recovery, adding that financial markets seem complacent to the mounting risk.
The dollar rose to fresh six-month highs against the yen, with USD/JPY advancing 0.52% to 112.86, the most since January 9.
The euro slid against the firmer dollar, with EUR/USD losing 0.2% to trade at 1.1685.
The pound was broadly weaker, with GBP/USD falling 0.55% to 1.3164 as fresh political uncertainty weighed ahead of another crunch vote in the UK parliament later in the day, with Prime Minister Theresa May facing threats from both sides of the Brexit divide.
Sterling was lower against the euro, with EUR/GBP climbing 0.33% to 0.8877.