February 10, 2014 / 11:25 PM / 4 years ago

FOREX-Currencies bide time ahead of Yellen's testimony

* Little action as markets await Yellen’s Congressional testimony

* Dollar holds near two-week lows against a currency basket

* Japan holiday and lack of key data keep currencies subdued

By Ian Chua

SYDNEY, Feb 11 (Reuters) - The dollar wallowed near a two-week low against a basket of major currencies early on Tuesday, following a subdued U.S. session trade as markets hunkered down ahead of congressional testimony by new Federal Reserve Chief Janet Yellen.

The dollar index last traded at 80.640, having inched down overnight to 80.590, a low not seen since Jan. 30. Against the yen, the dollar eased to 102.21 from a one-week high of 102.65.

Outperforming both the dollar and yen, the euro drifted up to near two-week highs of $1.3652 and 139.80 yen .

The moves were muted by any measure and even Wall Street ended flat as attention turns to Yellen, who faces her first test as chair of the world’s most powerful central bank.

She will have to deal with questions from U.S. lawmakers, some hostile to the central bank, who will want to know how committed she is to winding back exceptional stimulus measures.

Her testimony comes at a tricky time given two months of soft employment growth and as a deadline looms on raising the U.S. government borrowing limit before a possible debt default.

Analysts generally assume Yellen will reiterate the Fed will continue tapering its asset buying, as long as the economy improves as expected, while reaffirming a commitment to keeping rates low for a long time to come.

“We expect her messaging to be consistent with prior communications,” JPMorgan analysts wrote in a report to clients.

“We see no reasons why Chairman Yellen will front-run the FOMC in March, especially while waiting for the outcome of one more jobs report for additional clarity on the underlying trend in labour markets.”

Dollar bloc currencies, which came off their best weekly performance in about five months, took a bit of a breather.

The Australian dollar traded at $0.8950, holding under a four-week high of $0.8999 set Friday. The Canadian dollar was at C$1.1054 per U.S. dollar, while the New Zealand dollar traded at $0.8261.

Traders expect the major currencies to remain in a holding pattern in Asia with Japan shut for a public holiday and little in the way of market-moving data from the region.

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