Currency News: Dollar Stronger On Yellen’s Testimony

Currency News

The dollar moved higher against 14 of its 16 major peers last week after Federal Reserve Chair Janet Yellen gave testimony to congress. The greenback advanced 3% against the euro from a week earlier, the biggest gain in eight weeks, and settled at $1.0830 per euro. The dollar also rose 1.1% against the Japanese yen. Yellen’s comments had an optimistic tone on the US economy, leading investors to believe an interest rate hike was coming later this year.

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Investors had started to push back expectations for the expected interest rate hike into 2016. Investors had become worried that the worsening global risks in China and Greece would cause the Fed to delay the first interest rate hike in 9 years, but Yellen commented that global risks were unlikely to affect¬†her outlook on the US economy or borrowing costs. She also said that low inflation was due to transitory factors and would climb towards the central bank’s 2% target.

Yellen also claimed that economic weakness over the first three months of 2015 was due to temporary causes, noting that the energy prices had stabilized while consumer spending picked up. The testimony made clear that she was planning on increasing interest rates this year, which would make the dollar more attractive to yield-hungry investors. The comments pushed the dollar close to a ten-year high against other major currencies, as other central banks are decreasing their interest rates in a period of divergent policy, leaving more upside to the dollar.

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