• Fed's Williams sees gradual hikes as U.S. economy on track
  • Dollar little changed versus euro, yen before Fed chair speech

Volatility in the $5.3 trillion-a-day currency market reached the highest level in a month as traders awaited signals from Federal Reserve Chair Janet Yellen about the central bank’s interest-rate path.

The dollar fluctuated against the euro and the yen as Yellen may provide more clarity about how she sees the economy in a speech Tuesday. Her remarks follow comments from several other policy makers, most recently Federal Reserve Bank of San Francisco President John Williams, who repeated that the central bank will raise interest rates at a gradual pace.

"The market’s waiting to see which side of the divide Yellen comes on" with regard to interest-rate increases, said Steven Englander, Citigroup’s New York-based global head of Group-of-10 currency strategy. “Everyone walked away from the Federal Open Market Committee saying, ‘this is a really dovish Fed,’ and then you have a string of Fed people sounding more hawkish.”

The dollar’s resilience may depend on how the economy weathers turbulence from overseas. The currency has slumped more than 4 percent since the end of January on speculation U.S. policy makers will refrain from tightening rates amid a dimming outlook for global growth.

A JPMorgan gauge of foreign-exchange price swings was steady at 11.46percent as of 9:58 a.m. in New York, the highest since Feb. 29 on a closing basis.

The dollar was little changed at $1.1204 per euro and 113.42 yen. The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, was stable after sliding 0.4 percent Monday.

Traders put the probability of the Fed raising rates at its June meeting at 33 percent, down from 46 percent a week ago, according to data compiled by Bloomberg. The calculation assumes the effective fed funds rate will average 0.625 percent after the central bank’s next increase.

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