The US dollar reached a three-month high against a basket of currencies on Tuesday after Federal Reserve Chair Jerome Powell said the U.S. central bank is likely to raise rates more than previously expected, Reuters reported.
The U.S. dollar index, which measures the dollar against a basket of six major currencies, jumped 1.3% on Tuesday to a three-month peak of 105.65.
The Fed warned that the process of getting inflation back to 2% has "a long way to go."
The central bank is also prepared to move in larger steps if the "totality" of incoming information suggests tougher measures are needed to control price increases, Powell told U.S. lawmakers on Tuesday, the report said.
The Fed, in the last two meetings, had slowed the pace of its tightening to 25 basis points after larger hikes last year.
Fed funds futures traders are now pricing in a roughly 60% probability that the Fed will hike rates by 50 basis points at its March 21-22 meeting. The probability had been seen at around 22% earlier on Tuesday, it added.
Investors will be closely watching the Fed's updated "dot plot" of rate expectations at March's meeting for further indications of how high Fed officials expect to raise rates, it said.
The upcoming employment report for February, which will be released on Friday, will help determine if January's report, which exceeded expectations by showing a significant addition of 517,000 jobs, was a one-time occurrence or if it represents a more long-term trend, said the report.
Economists are projecting job gains of 203,000, while wages are expected to rise 0.3% for the month and 4.8% on an annual basis, it added.
Meanwhile, the Indian rupee opened lower at 82.07 against the US dollar in Wednesday's trade following hawkish comments from the US Fed. In February, the domestic currency plummeted by 1.10%, erasing all of its gains made in the prior month, as per reports.
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