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Dovish Fed Chair Yellen Stresses Gradual Approach

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Yellen stresses rate hikes will be gradual, stock markets rally and emerging market currencies haven't had it this good in a generation. Here are some of things people in markets are talking about today.

Gradual is the word of the day

Federal Reserve Chair Janet Yellen said a lot of what markets wanted to hear at her speech to the Economic Club of New York yesterday. She emphasized that rate hikes by the Fed would be gradual while spelling out what she means by data dependence. Market-implied odds of a rate rise at the April FOMC meeting fell to zero following her speech. 

Dollar weakens, markets rally

The dollar plunged as Yellen started speaking yesterday and is now headed for its worst month since 2010. Equity markets rallied across the globe, with the MSCI Asia Pacific Index adding 0.9 percent overnight while in Europe the Stoxx 600 Index is 1.2 percent higher at 10:45 a.m. London time, despite consumer confidence in the euro-area falling to the lowest in 13 months. S&P 500 futures are 0.6 percent higher, following yesterday's close at a 2016 high

Japan missing out

Japanese equities are missing out on the rally, with the Topix index dropping 1.6 percent and automakers among the biggest losers as the yen rallied to 112.20 relative to the U.S. dollar and industrial production data showed the largest drop since March 2011. The slump comes despite reports from Japan's public service broadcaster saying Prime Minister Abe is planning further stimulus ahead of elections this summer. In a sign of how little trading is happening in the Japanese sovereign bond market, the on-the-run 30 year bond saw no trades in the overnight session.

EM currency party

It's been at least 18 years since emerging market currencies have had a month as good as this March. Malaysia's ringgit is poised for its biggest monthly gain since the Asian financial crisis as the recent crude oil rally improves prospects for the energy exporter. The South African rand strengthened beyond 15 to the dollar for the first time this year while Russia's ruble is 11 percent higher against the dollar this month. 

Brazil

President Dilma Rousseff was delivered a major blow when Brazil’s biggest political party left the governing coalition just weeks ahead of impeachment proceedings against her are due to begin. The move further weakens the government and increases the chances Rousseff will lose the impeachment vote. Brazil's Ibovespa extended its best monthly advance since 1999 on the news. 

What we've been reading 

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