The dollar hit five-week highs against a currency basket on Wednesday after Federal Reserve Chairman Jerome Powell said the U.S. economic outlook remains bright, bolstering bets on further Fed rate hikes this year.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.18% to 90.47 by 03:32 AM ET (08:32 AM GMT), the highest level since Jan. 22.
Speaking before Congress, Powell said the Fed remains on track to gradually raise rates to keep the economy on an even keel amid strengthening growth and inflation.
“The economic outlook remains strong,” he said. “Further gradual increases in the federal funds rate will best promote attainment of both of our objectives.”
Powell also said that his personal outlook for the economy has strengthened since December.
The remarks bolstered expectations that the U.S. central bank may deliver four rate increases this year, rather than the three it had earlier signaled.
Expectations of rising borrowing costs tend to buoy the dollar, as higher rates make the U.S. currency more attractive to yield-seeking investors.
The euro slid to three-week lows against the dollar, with EUR/USD down 0.18% to 1.2210.
Against the yen, the dollar was lower, with USD/JPY losing 0.16% to trade at 107.17.
The yen pushed higher after the Bank of Japan trimmed bond purchases, reviving speculation that it is moving closer to an exit from its massive stimulus program.
BoJ officials have said adjustments to debt purchasing operations are not meant as hints at future monetary policy.
The safe haven yen was also underpinned after softer than expected Chinese factory data weighed on risk appetite.
The euro fell to its weakest level in five months against the yen, with EUR/JPYslumping 0.4% to 130.77.
Meanwhile, sterling was lower against the firmer dollar, with GBP/USD down 0.22% to 1.3875.