TOKYO (APP) – The dollar fell Wednesday as US Federal Reserve chief Janet Yellen hinted a rate hike was unlikely before the summer, while the euro held up as Greece delivered a reform package critical to extending its bailout.
In Tokyo, the dollar slipped to 118.73 yen from 118.94 yen in New York, as the euro ticked up to $1.1347 against $1.1342.
The common currency weakened to 134.73 yen from 134.90 yen in US trading. At the start of two days of congressional testimony on Tuesday, Yellen signalled that the Fed is preparing for a rate hike this year, but she hinted such a move would not come before June.
She said the US central bank can be patient before raising interest rates, stressing that the US labour market still showed cyclical weakness and inflation continued to slow.
“A high degree of policy accommodation remains appropriate,” Yellen told the Senate Banking Committee. The dollar has rallied this year on the growing strength of the US economy and expectations of higher interest rates, but Yellen’s comments suggested any rate hike was still a ways off.
“Yellen was decidedly noncommittal to the idea of a rate hike around the middle of the year,” Omer Esiner, chief market analyst at the currency brokerage Commonwealth Foreign Exchange, told Bloomberg News. “The reaction of the market is weaker dollar, lower yields, higher equities — the classic reaction you’d see from a slightly dovish Fed.”
The markets’ guessing game over a rise in the federal funds rate has intensified as central banks around the world lower interest rates and expand monetary easing to stimulate their economies.
“Everyone is reacting to what they want to see,” said Mizuho Bank strategist Sireen Harajli. “Yellen provides plenty of different assessments in her statement — some positive, some negative — and the market reaction is reflecting that.”
Euro trading was fixated on Greece, which submitted a list of reforms to meet demands made by its international creditors in exchange for extending the debt-saddled country’s bailout.
Despite reservations expressed by the International Monetary Fund and European Central Bank over the plan, eurozone ministers signed off on the package, which gives Athens a four-month lifeline to pay its bills and sidestep an almost certain exit from the eurozone.
