Dollar hits 15-month low against yen after Yellen testimony

Wed Feb 10, 2016 3:09pm EST
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By Dion Rabouin

NEW YORK (Reuters) - The dollar fell to a 15-month low against the yen on Wednesday as investors packed into the safe-haven Japanese currency, backing away from earlier optimism that the Federal Reserve would continue to raise interest rates.

Investors perceived dovishness on the part of Federal Reserve Chair Janet Yellen, who testified before the House Financial Services Committee on Wednesday morning.

"By the end of her testimony, sentiment completely shifted," said Kathy Lien, managing director of BK Asset Management in New York. Because "at the end of the day, everyone realizes the chances the Fed will be pulling the trigger next month have diminished significantly."

Yellen told members of Congress that she does not expect the central bank to reverse the rate-increase program it began in December but highlighted the risk continued global financial volatility posed to the U.S. economy.

"For the most part, dovish undertones of (Yellen's) testimony were enough to reinforce what the market had been thinking all along," Lien said, "which is that the Fed is probably not going to go through with a rate increase next month."

After initialing turning positive against the yen following the release of Yellen's remarks, the dollar reversed course, falling more than 1 percent and touching a session low of 113.74 against the yen. It was the lowest the dollar has fallen since Nov. 5, 2014.

The dollar was last down 0.95 percent at 114.01 yen.

The Fed had indicated it would raise interest rates four times this year after increasing them in December for the first time in nearly a decade.   Continued...

An employee of the Korea Exchange Bank (KEB) counts U.S. one hundred dollar notes at the bank's headquarters in Seoul in this November 11, 2008 file photo.  REUTERS/Jo Yong-Hak