* Dollar index inches lower
* Yellen testifies before Senate Banking Committee
* Dollar falls against yen, franc
By Sam Forgione
NEW YORK, Feb 27 The dollar edged lower on
Thursday, erasing gains from a day earlier, as market
participants looked toward remarks by U.S. Federal Reserve Chair
Janet Yellen on the economy and monetary policy in testimony
before the Senate Banking Committee.
The yen and the Swiss franc, meanwhile, rose on jitters over
the chance of Russian intervention in Ukraine, which added to
concerns about global emerging markets and drove capital towards
the world's traditional safe-haven currencies.
Russia's ruble hit a five-year low against the dollar on
Thursday. The dollar hit a high against the ruble of 36.2670,
the highest since late February 2009, as tensions escalated in
Ukraine after Russian President Vladimir Putin ordered drills by
his armed forces to test combat readiness in western Russia,
near the border with Ukraine.
The dollar last traded up 0.32 percent versus the ruble at
36.14. The dollar was also up 5 percent against Ukraine's
hryvnia, hitting a record high of 10.6 hryvnia.
Market participants also had their eyes on Yellen. The Fed
chair's opening comments to the Senate panel, however, were
identical to prepared testimony she delivered to a House of
Representatives panel earlier this month,
Yellen acknowledged U.S. economic data had been largely soft
since she last spoke, but said she wasn't certain how much of
the weakness was due to cold weather.
Minutes from the Fed's January policy meeting, released
recently, showed that several policymakers sought to emphasize a
predictable trimming of the central bank's monthly bond-buying
"The Fed is transparently confused, and it shows," said Axel
Merk, president and chief investment officer of Merk Investments
in Palo Alto, California.
He said investors were "starting to question" whether Yellen
would continue along the path of cutting the Fed's stimulative
asset purchases at its meetings.
Traders, meanwhile, waited to see what stance Yellen would
adopt in a question and answer session that was continuing as of
11:50 a.m. EST.
The dollar gained last week on the Fed minutes. A reduction
in the Fed's asset purchases is viewed to be positive for the
dollar since it could drive up interest rates and prompt greater
investment flows into the United States.
The dollar index, which tracks the U.S. dollar
against a basket of major currencies, was last down 0.03 percent
at 80.40 in morning trading. That marked a drop from the
previous day's gains, when it held near a two-week high.
The dollar was down against the euro, which last
traded up 0.18 percent at 1.3711.
Traders largely shrugged off Labor Department data showing
initial claims for U.S. state unemployment benefits increased
14,000 last week to a seasonally adjusted 348,000.
Other reports showed orders for long-lasting U.S.
manufactured goods excluding transportation unexpectedly rose
last month, as did a gauge of business spending plans. Both had
little effect on the dollar.
The dollar was last down 0.18 percent against the yen at
102.16. The dollar was also last down 0.26 percent
against the Swiss franc, which traded at 0.88825.
The franc hit its highest to the euro in 10 months in early
European trade, rising 0.2 percent against the euro
also buffetted early on by signs German inflation may have
slowed in February.
A broad flight into currencies like the yen and franc, that
tend to draw investors in times of market stress or risk, also
saw the yen gain 0.7 percent against the European single
currency and half a percent against the dollar.
Those moves may in part also reflect uncertainty over a big
decision that the European Central Bank will face next week, on
whether to take further action to spur growth.
They also come after the most severe fall in years for the
value of China's yuan, reflecting worries that an economy that
has propped up global growth for a decade is stuttering.
"This is definitely a risk aversion play although I wouldn't
put it mainly down to events in Ukraine," said Peter Kinsella,
strategist with Commerzbank in London. "Chiefly this is concern
over emerging markets as a whole and in essence China."