* Dollar at lowest versus euro since Jan. 29
* Investors eye Yellen for clues on Fed bond-buying cuts
* Aussie helped by business survey
By Laurence Fletcher
LONDON, Feb 11 The dollar fell to its lowest
level in almost two weeks on Tuesday ahead of congressional
testimony by new U.S. Federal Reserve chief Janet Yellen that
could give clues as to how quickly the Fed will cut back its
programme of stimulus.
The Australian dollar rose to its highest point in almost a
month, helped by an upbeat business survey and by buying from
hedge funds, who have been betting against the Aussie for months
but who are now taking profits, traders said.
Volumes were low due to a holiday in Japan and a lack of
major economic data, holding most currencies in recent ranges.
Yellen's first public test as chair of the world's most
powerful central bank will see lawmakers ask how committed she
is to winding back the emergency bond-buying the Fed has used to
prop up a fitful economic recovery.
Analysts generally assume Yellen will reiterate the bank
will continue to rein in purchases as long as the economy
improves as expected, while reaffirming a commitment to keeping
rates low for a long time to come.
But her testimony follows two months of lower than expected
employment growth and some other softer data which have raised a
question mark over the pace of America's recovery even if most
investors for now are blaming the weather.
The latest deadline for raising the U.S. government
borrowing limit and avoiding default is also looming.
"A lot will hinge on today," said Simon Smith, FxPro's head
"She's known as a dove, but it's the first time the question
(arises) of whether she wants totally to continue this line from
her predecessors or shake things up. I don't think she will
(shake things up), but it's a bit of a risk event."
FAILURE TO LAUNCH
A stronger dollar was one of the central bets of most banks
and analysts this year, judging the Fed's cut in bond-buying and
resulting higher yields would draw much of the funds it has sent
coursing through the world economy back into the dollar.
The U.S. currency's failure to deliver on that seems due in
part to the European Central Bank's baulking of expectations it
would loosen its own policy further and in part from an emerging
sell-off that has strengthened the euro, yen and dollar across
"The market has taken upon itself, because U.S. economic
recent performance has been relatively poor, that this means
there could be some slowdown in tapering or Yellen could be
relatively dovish," said Paul Chappell, CIO of UK-based hedge
fund firm C-View.
"It might be the market gets a bit of a surprise. (Unless)
we get a really significant bout of weak data, it looks like the
Fed is going to keep on tapering."
The dollar index fell as low as 80.47, its lowest in
almost two weeks, and was last down 0.2 percent at 80.482. The
euro also touched almost two week highs of $1.36835.
The Aussie has been supported in recent days by comments
from the central bank, which last week all but shut the door on
further rate cuts, citing improving economic conditions and a
pick-up in inflation.
National Australia Bank's measure of Australian business
conditions on Tuesday rose to its highest in nearly three years
But while hedge funds were buying, there was also
nervousness ahead of unemployment data on Thursday, which some
fear could be poor. On Monday Toyota said it would stop making
cars in Australia, at loss of about 2,500 jobs, by 2017.
The Aussie rose around 1 percent to $0.9039
while the New Zealand dollar gained 0.7 percent.