NEW YORK: The US dollar rose to a three-week high on Wednesday on heightened expectations that the Federal Reserve will raise rates earlier or more times than anticipated this year, while stocks on Wall Street rose led by financial shares.
Markets have priced in one interest rate hike from the Fed before the end of the year, but this week's US inflation data and a more hawkish tone from several Fed policymakers have led to analysts now seeing the Fed more likely to tighten monetary policy.
Markets see the likelihood of an interest rate rise in September at 57 percent, up from 49 percent Tuesday. Minutes from the last Fed policy meeting on April 27 are due at 2 p.m. EDT (1800 GMT).
Bank stocks, seen benefiting from higher interest rates, led gains on Wall Street while the high dividend payers like utilities and consumer staples weighed on the S&P 500 the most.
"There may be some nugget in the minutes that confirms what two Fed governors mentioned yesterday," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
"If others insinuate the same, that could set the market up again for some rough activity."
The Dow Jones industrial average rose 16.06 points, or 0.09 percent, to 17,546.04, the S&P 500 gained 3.37 points, or 0.16 percent, to 2,050.58 and the Nasdaq Composite added 24.90 points, or 0.53 percent, to 4,740.64.
Bank stocks also led European stock indices higher. The pan-European FTSEurofirst 300 index rose 0.75 percent and MSCI's gauge of stocks across the globe fell -0.01 percent.
DOLLAR INDEX AT HIGHEST SINCE LATE APRIL
The US dollar index, which measures the greenback against a basket of currencies, hit its highest since April 25 and was last up 0.13 percent.
"We've seen quite a lot of Fed speakers suggesting that the market is under-pricing tightening, and I think the rates market is beginning to get that message and is adjusting," said Daniel Katzive, head of FX strategy for North America at BNP Paribas in New York. "That is supporting the dollar."
The Japanese yen was down 0.42 percent versus the greenback at 109.58 per dollar and the euro fell 0.27 percent to $1.1280.
Sterling hit a three-month high against a trade-weighted basket of currencies after a UK poll about the chances of Britain voting to leave the European Union next month showed the "In" campaign 18 points in front.
Crude oil futures were little changed in volatile trading as investors focused on a large gasoline drawdown in US government oil inventory data, ignoring a surprise build in crude stockpiles.
US crude was recently up 0.6 percent at $48.60 and Brent crude last traded at $49.56, up 0.6 percent on the day.
US Treasury yields rose to multi-week highs on the higher rate expectations.
Benchmark 10-year notes fell 16/32 in price to yield 1.8122 percent, up from 1.759 percent on Tuesday.
Copper fell 0.8 percent to $4,618 per tonne.
Spot gold was down 0.6 percent at $1,271.88 an ounce.
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