The pound and euro both weakened in overnight trading amid the dollar’s strength. They recovered slightly on Thursday morning — the pound rose by 22 cents or 0.17 per cent to US$1.2283, while euro inching higher 0.08 per cent to US$1.0638.
Yellen’s speech was accompanied by the latest inflation data released by the US Labour Department, which shows the Consumer Price Index for December rose 2.1 per cent year on year, the biggest rise since June 2014.
Investors reacted actively to Yellen’s comments, viewing them as hawkish, after Donald Trump’s remarks had dragged down the US dollar earlier in the week, analysts at Aetos Capital said in a report, adding that the next threshold will be 101.7.
Trump said in an interview with the Wall Street Journal that the US dollar was “too strong” to compete with its counterpart in China.
“The broader dollar picture dominated trade overnight. US Treasury yields rallied overnight, underpinned by Hawkish Fed speak,” said Stephen Innes, a senior trader at Oanda.
The question now is whether Yellen supports the idea that there will be three interest rate rises this year alone, Innes said, adding that dealers will now be looking for more clarity during the Fed’s next meeting in March.
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