The U.S. dollar and Treasury yields climbed on Thursday as Federal Reserve Chair Jerome Powell suggested more U.S. interest rate hikes may be needed and the Bank of England delivered a bigger-than-expected rate hike.
Global stock indexes were mostly lower.
The Swiss National Bank (SNB) and Norges Bank also hiked their benchmark rates, underscoring worries about global inflation.
The Bank of England announced a half-point rate hike to 5%. Though the size of the hike surprised markets, expectations for BoE rate tightening have surged in recent days.
Before Thursday's decision investors expected the BoE's Bank Rate to peak at 6% by the end of the year. By contrast, economists polled by Reuters last week saw a 5% peak.
Powell, in his second day of testimony to lawmakers, said a strong majority of the central bank committee feels there is a little further to go with rate hikes.
"Investors need to recognize the reality that central banks around the world are going to continue to fight inflation aggressively," said Oliver Pursche, senior vice president and advisor for Wealthspire Advisors in Westport, Connecticut.
Last week, the Fed held its benchmark interest rate steady at between 5% and 5.25%, but investors have been expecting rate hikes to resume.
On Wednesday, Powell said in remarks to lawmakers in Washington that the outlook for two further 25-basis-point (bps) rate increases are "a pretty good guess" of where the central bank is heading if the economy continues in its current direction.
The dollar index, which measures the currency against six rivals, rose 0.21% to 102.23. Against the yen, the dollar was up 0.5% at 142.645 yen.
U.S. Treasury yields rose, in line with those on UK bonds, as investors focused on the hawkish comments from Powell and the BoE hike.
Benchmark 10-year notes were up 6.2 basis points to 3.785%, from 3.723% late on Wednesday.
On Wall Street, major stock indexes were flat to lower in early trading.
The Dow Jones Industrial Average fell 48.16 points, or 0.14%, to 33,903.36, the S&P 500 gained 1.73 points, or 0.04%, to 4,367.42 and the Nasdaq Composite added 66.55 points, or 0.49%, to 13,568.75.
The pan-European STOXX 600 index lost 0.58% and MSCI's gauge of stocks across the globe shed 0.17%.
In commodities, U.S. crude recently fell 2.69% to $70.58 per barrel and Brent was at $75.17, down 2.53% on the day.
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