The dollar strengthened by nearly 1 percent against most major currencies overnight and is currently trading at just over 1.09 against the euro after the chairman of the Federal Reserve, Janet Yellen, told the US Congress that she favoured a first increase in US interest rates for eight years, later this year.

"If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds target," Ms Yellen said as she addressed the House Financial Services Committee. 

Pointing to record low unemployment rates of 5.3 percent in the US and rising consumer confidence, Ms Yellen said the economy was now strong enough to bear a tightening of monetary policy. 

Despite recent pleas from the IMF to wait until next year, she said she favoured a first increase this year so that the subsequent pace and of interest rate increases is less steep and easier for the market to bear.