The dollar slipped against a basket of major currencies on Friday after Federal Reserve Chair Janet Yellen said that raising interest rates this month would be appropriate as long as the economy continues to improve as expected.
Yellen's remarks follow hawkish comments in recent days from a slew of Fed speakers and cement a likely rate hike at the Fed's next meeting on March 15.
Analysts said the rate increase had largely been priced in before Yellen's comments, sending the dollar lower on Friday afternoon as some investors took profits.
"There's a lot of positive news now priced into the market, and I think we'll probably see some profit-taking, so I think we'll probably see the dollar weaken from here," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.
Yellen also said rates are likely to rise faster this year as the economy for the first time in her tenure appears clear of any imminent hurdles at home or abroad.
"Yellen's comments have caught up with market expectations, in that she's looking for three rate moves this year," Borthwick said.
The dollar index, which measures the greenback against a basket of six major currencies, was down 0.7 percent. It is up about 0.4 percent this week and on Thursday, hit a seven-week high of 102.26.
Futures traders now are pricing in an 86 percent chance of a Fed hike in March, up from 35 percent on Tuesday, according to the CME Group's FedWatch Tool.
Against the Japanese yen the greenback was down 0.24 percent.
The euro rebounded from recent weakness to rise 0.93 percent against the dollar after a poll showed French far-right candidate Marine Le Pen's chances in the country's presidential election dimming.
The political race, however, has not been the main driver for the euro's recent weakness, said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
"That's more about the shift in relative yields and monetary stance given the move in short-term rates in the U.S.," he said.
Rate hike expectations also weighed on the New Zealand dollar, which was on pace for its worst week in eleven against the greenback. On Friday, the kiwi dollar was down 0.41 percent.
Mexico's peso rallied to a nearly four-month high after the new U.S. Secretary of Commerce Wilbur Ross offered support to the battered currency and said Mexico and the United States could reach a mutually beneficial trade deal.
Reference: Saqib Iqbal Ahmed