Dollar hits one-week high as Fed officials eye rate hikes

NEW YORK (Reuters) - The dollar rose to a one-week high against a basket of currencies on Wednesday as Federal Reserve officials talked up the likelihood of more interest rates later this year, perhaps as early as April.

The dollar index <.DXY>, which tracks the U.S. currency against six major rivals, rose about 0.4 percent to 96.044, the highest level since March 16.

Several members of the U.S. central bank in recent days have suggested the Fed should raise rates, which would make U.S. investments more attractive against other currencies and be expected to support the dollar.

The greenback also rose broadly against oil-linked currencies as crude futures fell more than 3 percent. The Canadian and Australian dollars , as well as the Mexican peso , each fell by more than 1 percent.

"The broad dollar move is really driven by the overall positive tone of the (Federal Open Market Committee) speakers that we've heard over the past couple days," said Ian Gordon, FX strategist at Bank Of America Merrill Lynch in New York.

St. Louis Fed President James Bullard said in an interview on Wednesday that policymakers should consider raising rates at their next meeting in April.

Those sentiments echoed Philadelphia Fed President Patrick Harker who said on Tuesday that "there is a strong case that we need to continue to raise rates."

Chicago Fed President Charles Evans added to the chorus, saying on Tuesday he expects two more rate increases this year, unless economic data comes in a lot stronger than expected or inflation picks up faster than anticipated.

Wednesday's moves pushed the dollar back near its levels prior to last week's Fed meeting when policymakers on average reduced their rate hike expectations. In a press conference, Fed Chair Janet Yellen warned of threats to the global economy, prompting a dollar selloff.

"The FOMC speakers that we've heard since the FOMC meeting last week have generally sought to offset the dovish interpretation and the dovish language in the statement," Gordon said, "and very much are keeping April and June on the table as potential times for a hike."

The dollar was flat against the yen after earlier hitting a one-week high against the Japanese currency, as U.S. stock markets turned negative and investors sought out the safe-haven currency.

The move into the yen was also a product of light trading in markets ahead of this week's Good Friday holiday, said Sireen Haraji, currency strategist at Mizuho Corporate Bank in New York.

(Reporting by Dion Rabouin; Additional reporting by Jemima Kelly; Editing by Jonathan Oatis and Paul Simao)

By Dion Rabouin