The U.S. dollar extended its rally against its most major opponents in the European session on Wednesday, as the Federal Reserve Chair Jerome Powell's upbeat assessment on economy and confidence in attaining inflationary goal raised hopes over the possibility of four rate increases this year.

In his first Congress testimony, Powell acknowledged that the economy is strengthening and inflation is moving up, which may trigger the policy makers to rethink their plan for three hikes.

"My personal outlook for the economy has strengthened since December," Powell said. "I wouldn't want to prejudge that new set of projections, but we'll be taking into account everything that's happened since December."

Financial markets are pricing in a 33 percent chance of at least four increases in the benchmark rate this year, up from 20 percent on Monday.

Investors await U.S. data on fourth quarter GDP, pending home sales and Chicago-area business activity due later in the day for more direction.

The currency has been trading in a positive territory against its major rivals in the Asian session, with the exception of the yen.

The greenback that closed Tuesday's deals at 1.3905 against the pound advanced to 1.3860. The greenback is likely to find resistance around the 1.37 level.

The greenback firmed to 1.2199 against the euro, its highest since January 18. On the upside, 1.19 is seen as the next resistance level for the greenback.

Flash data from Eurostat showed that Eurozone inflation slowed slightly in February on food and energy prices.

Inflation eased to 1.2 percent from 1.3 percent in January. The rate came in line with expectations.

The greenback reversed from an early low of 0.9386 against the Swiss franc, rising to near a 3-week high of 0.9437. If the greenback extends rise, 0.96 is possibly seen as its next resistance level.

Survey results by the KOF Economic Institute showed that a measure of the upcoming trends in the Swiss economy unexpectedly climbed in February, thus stabilizing at a level above its long-term average.

The Swiss KOF Economic Barometer rose to 108 from 107.6 in January, which was revised from 106.9. Economists had forecast the score to ease for a second straight month to 106.

The greenback strengthened to near a 3-week high of 0.7209 against the kiwi, reversing from an early low of 0.7243. Continuation of the greenback's uptrend may see it challenging resistance around the 0.69 region.

On the flip side, the greenback held steady against the yen, after having eased from a high of 107.53 set at 7:15 pm ET. The pair closed Tuesday's deals at 107.32.

Data from the Ministry of Land, Infrastructure, Transport and Tourism showed that Japan's housing starts logged a double-digit decline at the start of the year.

Housing starts decreased 13.2 percent year-on-year in January, faster than the 2.1 percent drop in December and the expected 4.7 percent decrease.

Looking ahead, Canada industrial product price index for January, U.S. GDP data for the fourth quarter and pending home sales for January are scheduled for release in the New York session.

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