The dollar climbed to a one-month high and bond yields rose on Wednesday as risks grew for a US interest rate hike in December.
Markets were put on notice by Federal Reserve Chair Janet Yellen who used a Tuesday speech to warn it would be “imprudent” to keep policy on hold until inflation is back to 2.0 per cent.
She said the US central bank “should also be wary of moving too gradually” on rates, according to Reuters.
Investors lifted the probability of a rate hike in December to 78 per cent, from 72 per cent late last week.
That sent the dollar to its highest level since Aug. 31 against a basket of currencies and was last holding at 92.966.DXY.
The market is now waiting to hear from US President Donald Trump on his tax reform plans.
The euro held at more than one-month lows at $1.1781 EUR= as investors faced months of political horse trading in Germany before a new government could be formed.
The dollar JPY= stood near a 2-1/2 month high on the yen at 112.27 helped by rising US Treasury yields.
The yield on benchmark 10-year Treasury notes US10YT=RR was up at 2.24 per cent after rising 2 basis points overnight.