Published: Thu, July 13, 2017
Economy | By Melissa Porter

Dollar hits four-month high ahead of Yellen's testimony

Dollar hits four-month high ahead of Yellen's testimony

"People are anxious that it just means more political uncertainty, and sort of a continuation of the stalemate in Washington, a continuation of the delay in trying to get the Trump agenda passed through Congress", said Robert Pavlik, chief market strategist at Boston Private Wealth in NY. She speaks to the House Financial Services Committee on July 12 and the Senate Banking Committee on July 13.

Considerable strength was also visible among steel stocks, as reflected by the 1.7 percent advance by the NYSE Arca Steel Index. "There's a lot more event risk later in the week", Issa said.

The jobless rate has averaged 4.5 percent so far this year but wages have not seen much of a bump and inflation has been under the Fed's 2 percent target for most of the last five years.

Ms Yellen was reporting to members of Congress about bank policy and the economic outlook.

The Fed last month raised the benchmark interest rates for the fourth time since December 2015 and unveiled a plan to trim its holdings of U.S. Treasury bonds and other mortgage-backed securities later this year. Brent crude oil prices increased 1.6 percent to to $48.29 per barrel in morning trading Wednesday.

"I expect, and certainly hope, that this will go smoothly and it will be a gradual and orderly process", Yellen said. President Trump could reappoint Yellen to another 4-year stint as Fed chair, and in the past he has both criticized and complimented her.

"Favorable financial conditions, coupled with the prospect of continued gains in domestic and foreign spending and the ongoing recovery in drilling activity, should continue to support business investment", Yellen said.

Yellen, in a prepared testimony delivered to Congress, said the economy is healthy enough to absorb further gradual rate increases and the slow wind down of the Fed's massive bond portfolio.

"The key takeaway is how confident Yellen is that rate hikes are needed over the next few years, which means there's a commitment that inflation will need to be combated a bit", said Juan Perez, a currency trader at Tempus Inc. Investors will look for clues as to how aggressively the Fed will continue to raise rates and start to unwind its big bond-buying stimulus program.

However, the Fed's efforts to normalize policy from its historically accommodative position has been constrained by low inflation.

The peso bucked the trend for the day, falling to 50.55 from its previous close of 50.53 after hitting its lowest since 2006 in its previous session as data showed that Philippines posted its widest trade deficit in decades in May.

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