U.S. dollar ends little changed after Yellen says Fed committed to policies to support recovery: April 17, 2014

Market Review - 16/04/2014 22:44GMT

U.S. dollar ends little changed after Yellen says Fed committed to policies to support recovery

U.S. dollar showed muted reaction after Federal Reserve Chair Janet Yellen said Fed committed to policies to support recovery even as policy makers now see the economy reaching full employment by late 2016.

Yellen said in a speech in New York that 'the larger the shortfall of employment or inflation from their respective objectives, and the slower the projected progress toward those objectives, the longer the current target range for the federal funds rate is likely to be maintained; this approach underscores the continuing commitment of the FOMC to maintain the appropriate degree of accommodation to support the recovery.' Yellen also said wage gains are proceeding at a 'historically slow pace,' and the chances of inflation rising above the Fed's 2% goal were 'significantly below the chances of inflation persisting below 2 percent'. U.S. equities maintained gains after Yellen's comments.

U.S. dollar rose against the Japanese yen to 102.37 due to improved risk appetites. Bank of Japan governor Kuroda said 'inflation expectation rising as a trend while long-term rates moving stably due to BoJ's massive bond buying; want to pull end deflation at an early date by steadily continuing with current QE policy; BoJ has no intention of monetizing government debt, keeping JGB yields low just to ease fiscal burden and regardless of prices move; too early to debate exit from QE now but when time comes, will do so using most appropriate measure at the time; strongly hope government continues to proceed with efforts to restore fiscal health.'

The single currency ratcheted higher to 1.3851 in Europe on Wednesday partly on active cross buying in euro especially versus as global stock markets rebounded, however, profit-taking offers below previous daily res at 1.3864 knocked price lower to 1.3804 before trading sideways in New York.

The British pound traded in a narrow range in Asia on Wednesday as traders awaited the release of UK jobs data. Cable strengthened to 1.6763 in early European morning in tandem with euro and then rallied to an intra-day high of 1.6818 after the release of better-than-expected UK jobs report. UK unemployment rate fell to a 5-year low at 6.9% from previous reading of 7.2%. However, selling interest below Feb's 4-year high at 1.6823 capped cable's upside and price moved sideways in New York session.

On the data front, U.S. industrial production and capacity utilisation came in better-than-expected at 0.7% n 79.2% versus forecasts of 0.5% n 78.7% respectively. U.S. housing starts came in less than expected at 0.946M versus forecast of 0.973M.

Thursday will see the release of New Zealand consumer confidence, Australia Business confidence, Japan consumer confidence, Germany PPI, EU current account, Canada CPI, U.S. jobless claim and Philadelphia Fed Business outlook.

No major economic data will be released on Friday. New Zealand, Australia, U.K. Germany, Swiss France, U.S. and Canada financial markets are closed due to Easter Good Friday holiday.