Fed chief comments support dollar in Asia

The dollar edged down against the yen in Asia Wednesday (12/02/2014) after climbing in New York in response to the new Federal Reserve chief’s pledge to maintain the bank’s monetary policy, while US lawmakers agreed to raise the debt ceiling.

In afternoon Tokyo trade, the greenback bought 102.50 yen, compared with 102.64 yen late in New York, while the euro was mixed at $1.3640 and 139.81 yen against $1.3638 and 139.99 yen in US trading.

In her first testimony since taking the Fed chair on February 1, Janet Yellen said the US economy is expected to grow this year and next at a moderate pace, despite some recent poor data that has sparked fears of a slowdown.

Yellen told Congress she expects to continue predecessor Ben Bernanke’s plan to gradually wind down the bond-buying scheme and keep interest rates low until there was a significant improvement in the jobs market, which she said was still shaky.

Fed policymakers were still comfortable with their forecasts of moderate growth this year and next, despite the poor job creation figures of the past two months, which Yellen said might have been caused by severe winter weather.

The Federal Open Market Committee, the Fed’s policy-making body which meets next month, could consider a pause in the stimulus tapering if economic conditions show a significant deterioration, she added.

Credit Agricole said: “We expect a further US dollar rebound today as traders acknowledge an ongoing reduction in Fed policy accommodation in coming months”.

It added that Yellen’s comments “suggested recent data provided little scope for altering current tapering speed”.

Sentiment was given extra buoyancy by news that Republicans had backed off on another showdown and waved a bill through the House of Representatives to increase the government’s debt limit until next March with no strings attached.

With the bill likely to pass the Democrat-heavy Senate, the move means Washington will avoid the partisan stand-off that has twice threatened to leave the US unable to pay its bills and default, hammering world markets.

Vice President Joe Biden described the news as “a victory for the country”.

The dollar was mostly lower against Asia-Pacific currencies.

It weakened to Sg$1.2656 from Sg$1.2688 on Tuesday, to 12,105 Indonesian rupiah from 12,163 rupiah, to 62.15 Indian rupees from 62.39 rupees, and to 44.94 Philippine pesos from 45.01 pesos.

It also eased to 32.68 Thai baht from 32.79 baht and to 1,062.95 South Korean won from 1,070.89 won.

The Australian dollar bought 90.58 US cents from 90.03 cents, while the Chinese yuan bought 16.92 Japanese yen from 16.88 yen. – Sapa-AFP

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