The dollar rose to its highest against the euro in nearly five months on Wednesday as investors bet Federal Reserve Chairman Alan Greenspan would reinforce expectations higher US interest rates were in the offing.
Greenspan said on Tuesday the threat of deflation was over in the United States and growth prospects were bright. The US central bank chief is expected to strike a similarly upbeat note when he addresses Congress at 1400 GMT.
"Greenspan acknowledged the recent improvement in US data and the dollar pushed higher," said Ian Gunner, head of foreign exchange research at Mellon Bank. "The market wants clues on the timing on US rate hikes and is looking to what he says today."
The dollar extended gains after vaulting key technical levels, hitting peaks of $1.1815 per euro and 1.3175 Swiss francs, its highest since late November.
The greenback also extended gains to a five-week high above 109.50 yen, up over half a percent since the New York close and five percent since the start of the month.
Rising interest rates are expected to support the US currency by making dollar deposits more attractive to foreign investors.
US interest rates currently stand at a 46-year low of one percent and markets are betting rates will be higher by August.
Sterling came under broad-based pressure after minutes of the Bank of England's policy meeting showed only one of the nine council members voted to raise interest rates this month.
Markets had expected a much closer vote in favour of keeping rates steady and reacted by scaling back expectations for further UK rate rises.
Sterling fell one percent to $1.7658, its lowest level since December, before paring losses to recover its footing above $1.7700.
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