[B]Market Review [/B]- 11/02/2014 [I]20:51GMT [/I]
[B]Dollar trades mixed after Fed’s Chair Yellen remarks[/B]
Dollar chopped around against other major currencies after Federal Reserve Chairwoman Yellen remarks on Tuesday. She said that U.S. economy are far from recovered and expects there to be ‘a great deal of continuity’ in the central bank’s policies.
Fed’s Chair Janet Yellen said on Tuesday that ‘pickup in economic activity has fuelled further progress in jobs market but labor market recovery far from complete; number of long-term unemployed, unemployed underscore importance of considering more than jobless rate when evaluating health of labor market; some of recent softness in inflation likely reflects transitory factors, cites oil and non-oil imports; FOMC believes at this stage recent volatility in global financial markets does not pose substantial risks to U.S. economic outlook; expects “great deal of continuity” in FOCM’s approach to monetary policy, strongly supports current policy strategy; likely to reduce pace of asset purchases in further measured steps if labor market conditions, inflation continue to improve; crossing policy thresholds would not prompt automatic rate hike but would indicate it appropriate to consider whether broader economic outlook justified a hike; committed to helping return economy to full employment and ensuring inflation not persistently above or below 2%; Fed expects to report results from stress tests of largest 30 bank holding companies in March.’
During the day, although the single currency traded sideways in quiet Australian morning, price jumped at Asian open on dollar’s broad-based weakness (caused mainly by rally in AUD) and rose to session high at 1.3678 after tripping stops above Monday’s high at 1.3652. Later, euro rose marginally higher to 1.3683 in European morning but lack of follow-through buying pushed price back down to 1.3663 and further to 1.3629 in New York morning after Fed’s Chairwoman Janet Yellen remarks before staging another rebound to 1.3680.
Versus the Japanese yen, although the greenback ratcheted higher after finding support at 102.08 in Asia and rose briefly to above Monday’s high of 102.65 to 102.67 after Fed’s Chairwoman Janet Yellen remarks, price swiftly tanked to 102.15 on renewed cross buying of yen climbing back to 102.56 n later rising marginally to 102.70 in New York afternoon session.
Cable rose above Monday’s high of 1.6428 to 1.6434 in tandem with euro in Asia on Tuesday but lack of follow-through buying pressured price back down to 1.6492 in European morning, however, active cross buying of sterling lifted price from there and the British pound ratcheted higher against the dollar to 1.6471 in New York morning before dropping briefly after Fed’s Chairwoman Janet Yellen remarks. Later, price rose further to 1.6488 before easing in New York afternoon.
In other news, Fed’s Plosser says ‘winter weather unusually disruptive, had negative impact on latest jobs data; winter weather making it difficult to asses underlying economic trends, could be months before a " better read" on U.S. economy; reiterates call for faster scaling back of Fed’s asset purchases to reflect strengthening economy; New Fed Chair Janet Yellen delight to work with, capable and competent; anticipates some level of continuity from Bernanke period; easier to lower than raise interest rates history shows always pretty late in raising rates; central bank needs to communicate better how it will react to economic data as it meets thresholds for inflation and unemployment; harsh winter weather leaves him skeptical of current economic data, has not changed economic outlook for 2014; has opened door with communication thru forward guidance but has not perfected it yet; concern that Fed will resist raising interest rates for too long and be forced to chase financial markets.’