By Tom Westbrook and Samuel Indyk

LONDON (Reuters) – The greenback scaled multi-month highs towards most different main currencies on Wednesday, after Federal Reserve Chair Jerome Powell warned that U.S. rates of interest may must go up even quicker and better than anticipated to rein in cussed inflation.

Larger charges profit the greenback by enhancing its yield and as merchants search for security whereas world inventory markets drop. [MKTS/GLOB]

The greenback hit a two-month excessive towards the euro of $1.0524, extending Tuesday’s 1.2% soar. Sterling, the Swedish and Norwegian crowns, the and the Canadian, Australian and New Zealand {dollars} all struck multi-month lows.

The U.S. greenback additionally broke above its 200-day-moving common towards the yen for the primary time this yr, rising so far as 0.5% to an almost three-month excessive of 137.9 yen.

Powell advised lawmakers on Capitol Hill on Tuesday that latest U.S. financial knowledge was stronger than anticipated and so the pace and measurement of future price hikes can also want to extend, which despatched short-term U.S. price expectations surging. [US/]

“The greenback may have a short-term tailwind within the subsequent few weeks because of a extra hawkish Fed,” mentioned Dane Cekov, senior macro and FX strategist at Nordea.

“We see the Fed mountain climbing to six% within the coming months and so they may transfer quicker now after Powell’s feedback.”

Powell is again for extra testimony from 1500 GMT, though ready remarks are anticipated to be unchanged from these revealed on Tuesday.

The Canadian greenback – final at 1.3754 to its U.S. counterpart and down greater than 1% since Monday – could also be weak to additional weak point if Canada’s central financial institution holds charges regular later within the day, as anticipated.

“Charge differentials in Canada in comparison with the U.S. leaves the Canadian greenback below strain, that is one thing the Financial institution of Canada might want to observe because of imported inflation,” Nordea’s Cekov mentioned.

The Australian greenback has weakened for the same purpose because the Reserve Financial institution of Australia has softened its tone. Having dropped over 2% on Tuesday, the Australian greenback recouped some losses to commerce 0.2% increased at $0.66.

Powell’s remarks additionally despatched short-term price expectations increased, with merchants now anticipating round a 65% likelihood of a 50 foundation level U.S. price hike in March, in keeping with CME’s FedWatch software, up from a few 30% likelihood a day earlier.

Futures indicate U.S. charges peaking above 5.6% and holding above 5.5% by way of 2023. Merchants have a laser deal with Friday’s U.S. payrolls knowledge and subsequent week’s inflation numbers.

“If these knowledge prints exceed expectations in any respect, primarily based on what Powell mentioned, that’d just about assure a 50-basis level hike in March,” mentioned IG Markets analyst Tony Sycamore in Sydney.

The rose as a lot as 0.2% to a greater than 3-month excessive of 105.88, having jumped by 1.3% on Tuesday, its largest each day improve since Sept. 23, 2022.

Sterling rose marginally to $1.1837, after earlier hitting its lowest since late November at $1.1811. [GBP/]

China’s yuan completed the home session at 6.9706 per greenback, the weakest such shut since Dec. 29, 2022.