Investing.com - The dollar traded mixed in choppy trading against most major currencies on Tuesday after a key Federal Reserve officials said rate hikes might need to come sooner rather than later.
In U.S. trading on Tuesday, EUR/USD was down 0.05% at 1.3702.
Charles Plosser, the head of the Federal Reserve's Bank of Philadelphia, said earlier that the Fed should consider winding down its monthly bond-purchasing program quicker than its current pace to ensure that inflationary pressures remain in comfort zones, while rate hikes should follow soon afterwards.
"My own view is that, as we continue to move closer to our 2 percent inflation goal and the labor market improves, we must be prepared to adjust policy appropriately. That may well require us to begin raising interest rates sooner rather than later," Plosser said in prepared remarks of a speech he delivered in Washington earlier.
"On monetary policy, reducing the pace of asset purchases in measured steps is moving in the right direction, but the pace may leave us behind the curve if the economy continues to play out according to FOMC forecasts."
The economy is improving and will continue to need less monetary support going forward, though don't expect a boom in the housing sector.
"I believe that the U.S. economy is continuing to improve at a moderate pace. We are likely to see growth return to around 3 percent through the rest of 2014. Prospects for labor markets will continue to improve, and I expect the unemployment rate will continue to decline, reaching 6.2 percent or lower by the end of 2014," Plosser said.
"I also believe that inflation expectations will be relatively stable and that inflation will move up toward our goal of 2 percent over the next year. I expect the housing and construction sectors will continue to recover. But we should not seek to return to the heady days of last decade's real estate boom."
The dollar rose on Plosser's comments, though less hawkish statements from his colleague in New York allowed for choppy trading.
William Dudley, head of the New York Fed, said rates will raise after the Fed winds down stimulus programs, though hikes will come gradually.
"My current thinking is that the pace of tightening will probably be relatively slow. This depends, however, in large part, not only on the economy’s performance, but also on how financial conditions respond to tightening," Dudley said in prepared remarks of a speech he delivered in New York earlier.
"If the response of financial conditions to tightening is very mild—say similar to how the bond and equity markets have responded to the tapering of asset purchases since last December—this might encourage a somewhat faster pace. In contrast, if bond yields were to move sharply higher, as was the case last spring, then a more cautious approach might be warranted."
The dollar was down against the yen, with USD/JPY down 0.20% at 101.29 and down against the Swiss franc, with USD/CHF down 0.03% at 0.8919.
The greenback was down against the pound, with GBP/USD up 0.16% at 1.6841.
The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.18% at 1.0894, AUD/USD down 0.80% at 0.9255 and NZD/USD down 0.64% at 0.8574.
The aussie took a hit after Reserve Bank Assistant Governor Guy Debelle said the local currency was likely to decline given an overall drop in foreign capital flows into Australian assets.
The currency also took a beating after the minutes of the Reserve Bank’s May meeting noted that "overall growth in coming quarters was likely to be below trend” due to slowing exports and a decline in mining investment.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.01% at 80.08.
On Wednesday, Fed Chair Janet Yellen is to speak at an event in New York. Later in the day, the Fed is to publish the minutes of its latest meeting.