Dollar gains extend after Yellen
There was talk before her testimony that Janet Yellen would want to make sure March was a 'live' meeting with a real chance of a hike. In order to do that, she would need to push the odds of a hike closer to 50% from 32% beforehand.
In her remarks she hinted at the possibility of a hike or hikes at upcoming meetings.
"At our upcoming meetings, the committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate," she told the Senate Banking Committee.
"Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession," she said.
In a series of jumps, USD/JPY has now rallied 100 pips to the best level since January 30.
What I think could curb the gains at some point (probably not today) is that Yellen's comments put plenty of conditions on a hike. She's played this game before and backed down. When the Fed is hiking, it generally telegraphs the move with a stronger signal. That may still come, but I suspect it won't come unless there is some stronger economic data or fiscal clarity from the White House.