By Joseph Adinolfi, MarketWatch , Rachel Koning Beals

Fed's Fischer says he expects 2 more rate hikes in 2017

The dollar strengthened against its main rivals on Tuesday after consumer confidence in March soared to its highest level in more than 16 years, helping to send Treasury yields and stocks higher.

The Conference Board said it Consumer Confidence Index leapt to 125.6 in March from 116.1 in February, surpassing economists' expectations for a 114.1, according to a survey conducted by MarketWatch (http://www.marketwatch.com/story/consumer-confidence-soars-in-march-to-best-reading-in-16-years-2017-03-28).

Its reading helped allay fears about sluggish economic growth in the first quarter, suggesting that the apparent weakness in consumer spending during the first quarter will prove short-lived, according to Capital Economics. The Atlanta Fed's GDPNow tracker is presently projecting gross-domestic-product growth of just 1% during the first quarter.

The euro fell to $1.0811 late Tuesday in New York, compared with $1.0864 late Monday, while the dollar climbed to Yen111.10 late Tuesday, compared with Yen110.66 late Tuesday.

Federal Reserve Vice Chairman Stanley Fischer also helped support the greenback by saying during an interview with CNBC (http://www.marketwatch.com/story/feds-fischer-forecasts-two-more-interest-rate-hikes-this-year-2017-03-28) that he expects the Fed to raise rates at least two more times this year. Two more rate hikes in 2017 seem "about right, that is my forecast," Fischer said.

Several other Fed officials, including Chairwoman Janet Yellen, also delivered public remarks on Tuesday, but the market participants mainly focused on Fischer's comments.

Earlier, the dollar had weakened as investors questioned whether President Donald Trump would be able to garner enough support among fractious congressional Republicans to pass tax cuts and infrastructure spending.

The dollar shot higher after Trump's upset victory in the Nov. 8 U.S. election, thanks in part to the perception that his promised fiscal-stimulus measures would bolster growth and inflation, allowing the Federal Reserve to raise interest rates more quickly.

But the greenback has erased some of those gains since the beginning of the year as investors bet that the market was too quick to price in the potential economic impact of Trump's policies. Typically, higher interest rates, or the expectation that rates will rise, will cause a currency to strengthen by increasing the return on assets denominated in it.

Last week, House Republicans withdrew a plan to repeal and replace Obamacare amid opposition from conservatives and some centrists within their own party, shaking investor confidence in Trump's ability to gain passage of other parts of his agenda.

"The market is still wondering if, given the concerns about the deficit and debt, Trump will be able to get support for a significant amount of fiscal stimulus," said Jane Foley, senior currency strategist at Rabobank.

The ICE Dollar Index , which gauges the dollar's strength against a basket of six rival currencies, rose 0.6% to 99.72. U.S. stocks turned higher, too, with the Dow Jones Industrial Average on track to snap an eight-day losing streak.

The Fed raised interest rates two weeks ago and is expected to hike rates at least two more times, according to the central bank's projections. However, the dollar sold off following the decision as investors were disappointed by the Fed's reluctance to signal a faster pace of rate increases.

The Fed-funds futures market are currently pricing in two more rate increases by December and higher interest rates are usually supportive of the dollar.

The British pound weakened against the dollar as the Scottish parliament voted to hold a second independence referendum, granting first minister Nicola Sturgeon the authority to negotiate with Westminster on holding another vote.

Investors are also bracing for the U.K. government to officially invoke Article 50, a decision that's expected Wednesday. The move would formally begin negotiations between the U.K. and European Union over the terms of the former's exit from the trading bloc. The pound traded at $1.2456 late Tuesday in New York, compared with $1.2559 late Monday.

In other currency trading, the South African rand sank for a second session in a row after Bloomberg News reported that President Jacob Zuma told several of his political allies that he's considering firing popular Finance Minister Pravin Gordhan. The rand traded at 13 to the dollar late Tuesday in New York, compared with 12.74 late Monday in New York.

Read:South Africa's currency, stocks plunge as finance minister clashes with president (http://www.marketwatch.com/story/south-africas-currency-stocks-plunge-as-finance-minister-clashes-with-president-2017-03-27)

(END) Dow Jones Newswires

March 28, 2017 15:30 ET (19:30 GMT)