* Dollar up as markets price in earlier start to Fed
* Yellen's comment taken as signalling possible hike early
* U.S. yields higher across the board
By Ian Chua
SYDNEY, March 20 The dollar traded at two-week
highs against a basket of major currencies early on Thursday,
having posted solid gains after comments from Fed Chair Janet
Yellen prompted markets to bring forward interest rate hike
Yellen said the Federal Reserve will probably end its
massive bond-buying program this coming fall, and could start to
raise interest rates around six months later, sooner than
markets had anticipated.
The reaction was swift with the benchmark Treasury yield
jumping 9 basis points to 2.77 percent. That in turn
helped the dollar index climb 0.7 percent, the biggest
one-day move in over a month, to highs last seen on March 6.
The greenback fetched 102.40 yen, having surged 0.9
percent, while the euro fell around 0.7 percent to $1.3822
. The Canadian dollar slid to a 4-1/2 year low of
C$1.1273 per USD, while the Australian dollar dipped back below
91 U.S. cents.
Markets all but ignored Yellen's emphasis that rates will
stay low for a while and could end up staying lower than normal
"for some time" even after the economy regains its health given
lasting scars from the financial crisis.
As a result, some analysts warned the big dollar rally could
fade just as quickly as it came.
"There may be some effort by Fed officials or sources to
downplay the six-month time-frame comment in the days ahead,"
BNP Paribas analysts wrote in a note to clients.
"The timing of Fed hikes and the ability of the U.S. dollar
to maintain momentum clearly remains data dependent and our
rates strategy team sees some scope for retracement in the big
selloff in yields that came on the comments."
Yellen's remarks followed the Fed's widely expected move to
reduce its monthly purchases of U.S. Treasuries and
mortgage-backed securities to $55 billion from $65 billion.
Sterling plumbed one-month lows against the broadly firmer
greenback, a disappointing performance given an upbeat annual
budget statement that saw the government upgrade official
forecasts for economic growth.
It last traded at $1.6533, having fallen as far as
$1.6508. The pound has been pretty much range-bound after
reaching four-year highs of $1.6823 last month.
Many economists say a lot of good news on the British
economy has been well and truly priced into the currency,
leaving little fuel for further gains.
This was also likely the case for the New Zealand currency,
which barely reacted to local data showing the economy grew at
an enviable 3.1 percent annual pace.
"It is a good number but one that was pretty much
anticipated. The message that the economy is growing above
potential is well established by now," said Ben Jarman,
economist at JPMorgan in Sydney.
The kiwi slipped to $0.8531, pulling further away
from a near one-year high of $0.8641 set earlier in the week.
(Editing by Richard Pullin)