* Dollar hovers near 3-1/2-week high after Yellen's
* U.S. CPI, retail sales due later in the day
* Euro pressured by political risks in France
By Yuzuha Oka
TOKYO, Feb 15 The dollar stood tall on Wednesday
after Federal Reserve Chair Janet Yellen signalled a faster pace
of U.S. interest rate increases at her two-day testimony before
Yellen told the U.S. Senate Banking Committee the central
bank will likely need to raise interest rates at one of its
upcoming meetings, although she expressed caution amid
considerable uncertainty over economic policy under the Trump
The dollar index, which measures the greenback
against its six major peers, rose to a 3-1/2-week high of 101.38
on Tuesday following Yellen's remarks. The index was last up 0.1
percent at 101.27.
"Investors didn't expect Yellen to be that hawkish, so the
dollar gained," said Ayako Sera, market strategist at Sumitomo
Mitsui Trust Bank.
"There are no big factors preventing the Fed from raising
rates in March. Unless the emerging markets become volatile or
the U.S. economic data shows weakness, the March rate hike is
highly plausible," added Sera.
U.S. interest rates futures implied traders
saw about a 20 percent chance of three rate increases in 2017,
up from less than 10 percent on Monday.
Since the end of the 2007-09 recession, the Fed has raised
rates once in December 2015 and again in December of last year.
President Donald Trump has announced a rollback of financial
regulation though details remain scarce, and markets are yet to
get clarity on the size and scope of the tax cuts he has
"Changes in fiscal policy or other economic policies could
potentially affect the economic outlook," said Yellen,
underscoring the uncertainty over economic policy.
The dollar was fetching 114.28 yen, not far from the
two-week peak of 114.49 yen touched on Tuesday.
The euro was last down 0.1 percent at $1.0572, wallowing
near a one-month low of $1.0559 plumbed on Tuesday amid
political risk and disappointing regional economic
The euro has come under pressure from concerns about
France's presidential election and Greek bailout talks. Polls
showed National Front leader Marine Le Pen, who has promised to
pull France out of the euro zone and hold a referendum on
European Union membership, is leading in the first round of the
French presidential runoff.
Investors are eyeing a batch of U.S. economic data due out
later on Wednesday, including consumer price index (CPI) and
retail sales, for any fresh catalysts..
The CPI is expected to have risen 0.3 percent in January
after a similar gain in December, while retail sales are likely
to have risen 0.1 percent in January after advancing 0.6 percent
the previous month.
(Editing by Shri Navaratnam)