Investing.com - The dollar was slightly higher against a basket of the other major currencies on Wednesday after Federal Reserve Chair Janet Yellen reiterated that rate hikes would gradual, while the Canadian dollar rallied after an interest rate hike by the country’s central bank.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.14% to 95.62 by 10.46 AM ET, holding above the nine-month low of 95.22 plumbed in late June.
In prepared testimony to the House Financial Services committee, Yellen said the Fed is likely to unwind its stimulus despite low inflation.
Yellen gave no clear indication of whether the Fed would raise interest rates a third time this year.
The Fed chair also emphasized that inflation is below target and noted that it is a particular “uncertainty” that could affect monetary policy.
USD/JPY was down 0.64% to 113.20 following the remarks, well below the four-month high of 114.49 set on Tuesday.
The dollar came under pressure against the yen overnight amid fresh concerns over the Trump administration’s alleged connection with Russia.
Emails released by Donald Trump Jr revealed that he welcomed assistance from a Russian lawyer during his father's 2016 election campaign against Hillary Clinton.
The euro was lower against the dollar, with EUR/USD down 0.51% to 1.1408 after rising to a 14-month peak of 1.1489 overnight.
The Canadian dollar jumped to near one-year highs against its U.S. counterpart, with USD/CAD last at 1.2824 after the Bank of Canada hiked interest rates to 0.75%.
It was the first rate increase by the BoC in nearly seven years, making it the first major central bank to join the Fed in tightening monetary policy.
Meanwhile, sterling recovered from two-week lows, with GBP/USD climbing 0.3% to 1.2883 after the latest UK jobs report showed that the jobless rate fell to a 42-year low in the three months to May, but pay growth continued to lag behind inflation.
The pound weakened in early trade after Bank of England Deputy Governor Ben Broadbent said in an interview published on Wednesday that he is not ready to raise interest rates just yet.
The remarks indicated that the BoE is now almost certain to keep rates on hold at their current record lows at next month’s meeting.