Dollar Touches 3-Week Low as Yellen Keeps Quiet on Fed’s Timingby and
Greenback fluctuates as markets adjusts central-bank outlook
U.S. currency tumbled last week after jobs growth slowed
The dollar reached a three-week low after Federal Reserve Chair Janet Yellen said additional gradual interest-rate increases are appropriate, without specifying their precise timing.
The Bloomberg Dollar Spot Index fluctuated after last week’s 1.6 percent decline, which was triggered by a U.S. Labor Department report showing employers in May added the fewest number of workers in almost six years. In a speech in Philadelphia Monday, Yellen said she is watching “four areas of uncertainty” in the economic outlook.
“The speech was viewed a little bit less hawkish than people had expected,” and that’s containing any strength in the dollar, said Lynn Chen, a senior portfolio manager at Aberdeen Asset Management Plc in New York, which manages $421 billion. “She mentioned neither timing or a pre-set course -- that probably gives markets a dovish feeling,” said Chen, who said that the dollar still has some room to rise later this year, should the Fed eventually tighten policy.
The dollar rose last month, paring its declines this year, after policy makers including Yellen said higher rates in the coming months look appropriate. The jobs report poured cold water on speculation that tightening monetary policy would bolster the greenback.
The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, was little changed as of 5 p.m. in New York, after reaching the weakest level since May 11. It slumped 1.5 percent on June 3, the most since Feb. 3.
The greenback was little changed at $1.1355 per euro, after weakening 1.9 percent in the previous session. It rallied 1 percent to 107.56 yen, halting a four-day slide.
Yellen was less specific than in her previous remarks in describing when she expected the Fed to raise rates again. On May 27 at Harvard University, she said an increase would likely be appropriate in “coming months,” a phrase omitted from Monday’s speech text. The central bank raised its target for the federal funds rate by 0.25 percentage point in December, the first increase since 2006.
"Markets are somewhat skeptical, or there’s enough uncertainty in the speech itself to cap dollar optimism," said Bipan Rai, executive director of foreign exchange and macro strategy at Canadian Imperial Bank of Commerce in Toronto.
Traders see a 2 percent chance the Fed will raise interest rates by its June 14-15 meeting, down from 30 percent odds a week ago, futures contracts indicate.
Hedge funds and other large speculators increased bullish bets on the dollar by 16,719 contracts in the week ending May 31 to a net long position of 84,149, the highest since the period ended March 22, according to data from the Commodity Futures Trading Commission. Strategists still forecast a stronger dollar for 2016.
The U.S. currency is projected to strengthen to $1.10 per euro and 115 yen by the end of the year, according to surveys of analysts by Bloomberg.
“We do see some upward pressure” on the dollar this year, even though its ascent isn’t going to be as rapid as last year, said David Page, a senior economist at AXA Investment Managers in London, which manages $727 billion. The trade-weighted greenback will probably gain as the Fed tightens policy, while its biggest peers carry out stimulus, Page said in an interview at Bloomberg’s headquarters in New York.