The US dollar surged to its highest level in nearly 18 months on Thursday as currency traders reacted to Federal Reserve chair Jay Powell’s refusal to rule out an aggressive series of interest rate rises this year.

Powell said on Wednesday the US central bank would be “humble and nimble” in deciding how quickly to tighten monetary policy in the face of soaring inflation, a phrase interpreted by investors as leaving the door open to a faster pace of rate increases than previously anticipated. The dollar rose 0.6 per cent against a basket of rival currencies, eclipsing a recent high in November and reaching a level not seen since July 2020.

The gains came as markets priced in five quarter-point rate rises from the Fed by the end of this year, widening the gap in rate expectations between the Fed and other big economies, and boosting the dollar.