Yellen signals Fed will likely raise rates in March

New York Fed President William Dudley - one of the most influential USA central bankers - said the case for tightening monetary policy had become "a lot more compelling", while San Francisco Fed President John Williams said he saw "no need to delay" raising rates.

Yellen's speech comes after several other Fed officials this week painted an upbeat picture of the U.S. economy, stoking market expectations for a March rate hike.

Investors were also impressed by hawkish statements from Federal Reserve officials, such as New York Fed President William Dudley who indicated the case for another interest rate was becoming "a lot more compelling".

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.

Inflation data on Wednesday showed consumer prices inJanuary posted their biggest monthly gain in four years and leftthe 12-month increase in prices at 1.9 percent, just below theFed's 2 percent target.

US stocks touched new record highs on Wednesday as talk of a pending rate hike overshadowed Trump's address to Congress on Tuesday night.

Some analysts said Trump's speech, while lacking details on economic policies, did seem positive after a turbulent month in office.

The ICE Dollar Index DXY, -0.31% which measures the US currency against a basket of six big rivals, hit a two-month high of 102.16 on Thursday, and was hovering just below that level on Friday. USA 2-year yields hit their highest since August 2009 of 1.32 percent while the 3-year yield hit a almost 11-week high of 1.598 percent.

The greenback traded at 113.16 yenJPY=, up 0.35 percent from late USA levels, while the euro dropped 0.1 percent against the dollar to $1.0565EUR=.

Another key ingredient has been a relatively calm reaction in financial markets to the increase this month in rate-hike pricing by traders, Krishna Guha, vice chairman of Evercore ISI and a former New York Fed official, wrote in a note.

Fed fund futures markets now figure there's an 82% chance the Fed will act this month, up from about 20% a couple of weeks ago.

Against its Japanese counterpart, the dollar was up 0.3 percent at 114.04 yen.

In commodity markets, oil prices edged up as investors took heart from strict OPEC compliance with its pledge to cut output, though evidence of increasing US production capped gains. GBP Predicted to Slide if Construction and Services PMIs Both Drop This WeekThe Pound may be in for further losses against the US Dollar this week, given that two more PMIs are scheduled to be released before the weekend. 10-year U.S. treasuries climbed by 1.14 percentage points to 2.49%. It jumped more than one percent against South Korea's won, 0.2 percent on the Indonesian rupiah and 0.8 percent versus Australia's dollar.