After Federal Reserve Chairperson Janet Yellen’s comment on the US interest rate increase, the market witnessed sudden transformation, prompting decline of stocks on Wall Street and hike in US dollar value.

The dollar swung in a 12-year high on Wednesday along with a multi-year increase in the shorter-term Treasury productions trade. The market’s emphasis on the scope of rising policy divergence, which was increasing the difference between the US and the rest of the world, also contributed to the present market scenario.

Yellen stated that she was awaiting a rise in the US interest rate, which is seen necessary for the country’s recovery from recession. US data has shown there will be a solid labour market visible in the coming days. The chair did not disclose whether the hike was expected to be declared at the year’s last policy meeting of Fed on Dec. 15 and 16.

On the comments of Yellen, Atlanta Fed President Dennis Lockhart called raising the U.S. interest rates in December compelling. In addition, UniCredit chief US economist Harm Bandholz said that the Federal Reserve was making a drastic move in nine and a half years, which Yellen and centrist Federal Open Market Committee member Lockhart put forth in unison.

“Barring any ‘drastic change’ in the outlook or the occurrence of a massive external shock within the coming two weeks, the Fed will therefore finally begin to normalise its policy stance,” Bandholz said as quoted via the Financial Times.

Greenwich JonesTrading Chief Market Strategist Michael O’Rourke said that he was surprised by the way Yellen sounded. He said she sounded “hawkish as she did given we’re two days away from the nonfarm payrolls report and a couple of weeks away from the Fed FOMC meeting.”

Yellen would have a look on the economic outlook ahead of a joint Congressional committee on Thursday. American private companies have begun hiring labour forces in November. According to the ADP National Employment Report, private payrolls have witnessed a hike in November.

Another report indicated a significant growth in nonfarm productivity than expected in the third economic quarter. The Fed prepared a Beige Book Report on the basis of anecdotal details relating business operations collected from around the world. This report showed that US job market has become stricter in the past few weeks, prompting an increase in wages.

Contact the writer at feedback@ibtimes.com.au, or let us know what you think below.

RELATED STORIES