US Federal Reserve chair Janet Yellen gave a boost to the dollar and sent treasury yields higher as she signalled a rate hike in March could be more likely than investors were expecting.
Speaking to Congress, Yellen (pictured) said it would be "unwise" to wait too long before raising US interest rates once again, though she stressed increases would be made at a slow pace, as previously indicated.
She said: "As I noted on previous occasions, waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession."
In December, when interest rates in the US went up by 0.25%, the central bank said it would raise rates again up to three times in 2017.
However, according to CNBC traders had previously ruled out the possibility of a rate rise in March, with most expecting a hike in June at the earliest. However, Yellen's hawkish comments prompted the market to reassess its expectations, with Fed fund futures pointing to a 23% probability of a March rate hike, up from 16% earlier.
On the back of Yellen's comments, the Dollar Index Spot rate rose 0.3% to 101.3 against a basket of major currencies, hitting a three-week high.
US treasury yields also spiked, with the two-year treasury yield rising to 1.24% from a low of 1.18% earlier that day, while the benchmark 10-year yield rose to 2.49% from 2.43%.
Joshua Mahony, market analyst at IG, said: "Janet Yellen played few games attempting to move the markets in her favour today, speculating that it would be unwise to wait too long before raising rates further.
"Yellen's speech struck a distinctly hawkish tone with the markets, pushing the dollar index to a three-week high. There is a clear carry trade growing in favour of the dollar, with the prospect of higher rates largely unmatched across the developed world."
1,044 complaints against advisers in six months
With effect from 3 January 2018
Examine the active share ratio
Down 0.7% to $1.238
Our regular video series continues