The dollar rose to almost a five-year high as Federal Reserve Chair Janet Yellen indicated that the central bank is on pace to increase interest rates as early as April.
The greenback gained against most of its major peers as officials replaced a pledge to keep borrowing costs near zero for a “considerable time” and held the rate at zero to 0.25 percent, where it’s been since 2008. Russia’s ruble snapped a seven-day drop as the finance ministry said it was selling reserves to counter a plunge that sent the currency to a record. Brazil’s real helped lead Latin American currencies higher for the first time in 10 days. The Chinese yuan fell.
“Things change quickly, and if they see a rapid rebound in the credit market and an acceleration on the payroll side, they want to have the option to raise rates significantly by mid-year,” said Robert Tipp, chief investment strategist in Newark, New Jersey for Prudential Financial Inc.’s fixed-income division, which oversees $533 billion in bonds. “It’s been a tremendous backdrop for the dollar.”