Dollar gains as Fed's Yellen, PPI bolster rate hike expectations

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The dollar rose on Wednesday after Federal Reserve Chair Janet Yellen reinforced market expectations for a U.S. interest rate hike, possibly as soon as September.

The top U.S. central banker told Congress that the Fed remains poised to raise interest rates this year, with labor markets expected to steadily improve and turmoil abroad unlikely to knock the U.S. economy off track.

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The dollar also got a lift from U.S. Labor Department data showing that its producer price index for final demand increased 0.4 percent last month after adding 0.5 percent in May. The data was seen as supportive of a Fed rate hike.

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The greenback, which had been flat, jumped after the release of Yellen's written comments and the wholesale inflation figures. It was last up 0.55 percent against the euro at $1.0948 and 0.30 percent against the at 123.69 yen.

Yellen's statement, which was followed by a House committee hearing, largely tracked her recent public comments, as well as the most recent statement by the Fed's policy-setting committee.

"There was no straying from the message," said Alan Ruskin, global head of FX strategy at Deutsche Bank in New York.

The dollar also got a boost from Canada's dollar, which sank more than 1.5 percent against its U.S. counterpart to a six-year low after the Bank of Canada cut its key interest rate for a second time this year.

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"The weakness of Canada and the strength of the dollar are kind of spilling over elsewhere, certainly with the commodity currencies," Ruskin said.

Both the commodities-reliant New Zealand dollar and the Australian dollar were off more than one percent against the greenback in late New York trading.

Currency traders were shifting focus from the fading risk of an immediate Greek exit from the euro zone to interest rate policy, according to Derek Halpenny, European Head of Global Markets Research at Bank of Tokyo-Mitsubishi UFJ.

The dollar index was last up 0.52 percent, including a 0.75 percent rise in the dollar against the Swiss franc to 0.9526 franc, according to Thomson Reuters data.