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FOREX-Dollar extends gains despite dovish Yellen comments
May 7, 2014 / 8:06 PM / 3 years ago

FOREX-Dollar extends gains despite dovish Yellen comments

(Updates prices, adds comments, impact of Thursday’s ECB meeting)

* Dollar extends gains after Yellen testimony

* Dovish Yellen comments were expected

* Rouble gains on Putin comments

By Sam Forgione

NEW YORK, May 7 (Reuters) - The dollar rose broadly on Wednesday after traders removed short positions against the U.S. currency on the view that persistently dovish comments from the Federal Reserve have become less effective in weakening the dollar.

Fed Chair Janet Yellen, in testimony before the Joint Economic Committee of Congress, maintained her dovish stance and said a high degree of monetary accommodation was warranted given “considerable” slack in the U.S. labor market and low inflation.

“The dollar has been weaker for weeks, so it was time for it to have some reprieve,” said Axel Merk, president and chief investment officer of California-based Merk Funds.

The dollar had pared losses against the euro and risen broadly ahead of Yellen’s testimony after investors began removing short positions on the view that negative sentiment toward the U.S. currency had largely been priced into the market.

The dollar also extended its gains on a slight rise in long-term Treasuries yields after the release of Yellen’s testimony at 10 a.m. (1400 GMT). Prices of 30-year Treasury bonds were last down 13/32 to yield 3.4 percent, from a yield of 3.38 percent late on Tuesday.

The euro was last down 0.09 percent against the dollar at $1.3915. The dollar was last up 0.15 percent against the Japanese yen at 101.825, and was up 0.2 percent against the Swiss franc at 0.876 francs.

The euro also traded lower against the dollar on hesitation ahead of the European Central Bank’s policy meeting on Thursday.

“People are reluctant to take big positions ahead of time,” said Merk.

According to the median in a Reuters poll of over 60 foreign exchange strategists taken in the past week, the euro, trading around $1.39 earlier on Wednesday, would need to climb another 2 percent to trigger any policy action.

The U.S. dollar index, which measures the dollar against a basket of six major currencies, was last up 0.15 percent at 79.215.

The dollar fell 1.36 percent against the rouble to trade at 34.92 roubles on reduced geopolitical risk surrounding Russia and Ukraine.

The Russian currency extended its gains against the dollar after Russian President Vladimir Putin called on separatists in eastern Ukraine to postpone a referendum on independence for the mostly Russian-speaking region. Putin also said Moscow had withdrawn troops from the border with Ukraine. [ID: nL6N0NT52F]

“There has been a relaxation of tensions in Ukraine,” said Lane Newman, director of foreign exchange at ING Capital Markets in New York. (Reporting by Sam Forgione; Additional reporting by Patrick Graham in London; Editing by Dan Grebler and Chizu Nomiyama)

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