By James Ramage
The dollar rose against the euro and edged higher against other currencies on Monday ahead of testimony Federal Reserve Chairwoman Janet Yellen will provide to Congress on the U.S. economy and interest rates.
The euro slid 0.4% to $ 1.1331 in late-afternoon trade. The Wall Street Journal Dollar Index, which weighs the dollar against a basket of highly traded currencies, rose 0.3% to 85.62, its highest level since Feb. 11.
Investors were hesitant to make large wagers before Ms. Yellen’s testimony, which begins Tuesday morning before the Senate Banking Committee. She meets with the House Financial Services Committee the following day.
Expectations vary widely for Ms. Yellen’s assessment of the U.S. economy and whether she will offer clues for the central bank’s schedule for raising interest rates for the first time since 2006. The Fed’s policy-making committee signaled in the statement of its January meeting that it could raise interest rates as early as mid-2015, citing solid gains in the labor market. Such a move would make the dollar more attractive to yield-hungry investors.
However, the minutes from the January meeting released last week took a surprisingly cautious tone and highlighted bigger risks to the U.S. economy stemming from a stronger dollar as well as slowing growth and falling prices abroad. The minutes’ tenor pushed back market expectations for a rate increase and drove the dollar lower.
“There was a lot of focus last week on the dovishness of the Fed minutes,” said Elsa Lignos, senior currency strategist at RBC Capital Markets. “But there’s plenty of room for Janet Yellen to take a more hawkish tone in her testimony.”
In addition, investors will be watching U.S. inflation and growth data arriving later this week, said Camilla Sutton, chief currency strategist at Scotiabank. Specifically, investors will pay close attention to consumer-price index numbers for January scheduled for release on Thursday and, to a lesser extent, on the second estimate for fourth-quarter gross domestic product.
“We need a catalyst to break us out of these trading ranges,” Ms. Sutton said. “That’s likely to come from the Fed, or new U.S. data.”
In other trade, the dollar slipped 0.2% against the yen, to 118.83 yen.
Write to James Ramage at [email protected]
(END) Dow Jones Newswires 02-23-151640ET Copyright (c) 2015 Dow Jones & Company, Inc.