Currencies: Dollar dips on delayed rate-hike expectations

NEW YORK (MarketWatch) — The U.S. dollar inched lower against its main trading partners Wednesday, extending losses from Tuesday’s session, after Federal Reserve Chairwoman Janet Yellen suggested the central bank isn’t ready to raise interest rates just yet.

The dollar traded flat against the euro EURUSD, +0.15%  and yen USDJPY, -0.04% with the euro worth $ 1.1345 and the buck trading at ¥119, compared with $ 1.1349 and ¥118.75 Tuesday.

The ICE U.S. Dollar Index DXY, -0.19% a measure of the dollar’s strength against a trade-weighted basket of six rival currencies, was 0.1% lower at 94.3950.

The pound GBPUSD, +0.23%  and the Australian dollar AUDUSD, +0.73%  were especially well-bid versus the buck, with sterling trading at $ 1.5494, its highest level since the start of 2015. It traded at $ 1.5476 late Tuesday.

Sterling benefited from a rise in British Bankers’ Association mortgage approvals — a sign of renewed strength in the U.K. housing market.

The aussie AUDUSD, +0.73%  traded at 78.82 cents, just below its highest level since Jan. 28, up from 78.59 Tuesday.

A gauge of manufacturing activity in China, released late Tuesday, came in stronger than expected, which helped push the aussie as high as 79 cents, its highest level since late January. China is the world’s largest consumer of iron ore, one of Australia’s largest exports.

The dollar was little-changed as Yellen began her semiannual testimony to the House Financial Services Committee. On Tuesday, Yellen said the Fed wouldn’t raise interest rates until inflation was on track to hit the central bank’s target level of 2%, which pushed back the market’s expectation for the timing of the first interest-rate increase since 2006 and weighed on the buck.

“The Fed confirmed that the US economy is improving, but also noted the lack of inflation in the system as well as slack in global growth demand. In short the message from Ms. Yellen was — ‘We are close to normalization, but not quite yet,’” wrote Boris Schlossberg, managing director of FX strategy at BK Asset Management.