The dollar hit a seven-week high on Wednesday after hawkish comments from two Federal Reserve officials late on Tuesday increased expectations that the US central bank is closer to raising interest rates. New York Fed President William Dudley, a permanent voter on the US central bank's open market committee, said the case for tightening monetary policy "has become a lot more compelling."
John Williams, President of the San Francisco Fed, said a rate increase was very much on the table for serious consideration at the March meeting given full employment and accelerating inflation. "Williams and Dudley are very strongly signalling the fact that March is a live meeting, and that's occurring against the backdrop of consistently strong (economic) numbers," said Richard Franulovich, a senior currency strategist at Westpac Banking Corporation in New York.
The greenback climbed 1.05 percent to touch a two-week high of 113.92 yen and gained half a percent against the euro to $1.0521. Futures traders are now pricing in a 69 percent chance of a Fed hike in March, up from 35 percent on Tuesday, according to the CME Group's FedWatch Tool. China's yuan was down just 0.2 percent on the day. The Chinese currency has been a target for markets given Trump's previous aggressive talk on trade but has risen for the past two months as the dollar's rally stalled.
The Mexican peso, seen as the most vulnerable to Trump's protectionist policies, rose 0.29 percent to 20.04 pesos per dollar. The dollar also rose against sterling, with the pound falling below $1.23 for the first time since late January after weak British manufacturing and credit data.