Summary The dollar traded little changed against the euro after Fed chair's testimony.
NEW YORK (AFP) - The dollar traded little changed against the euro and yen after Federal Reserve Chair Janet Yellen signaled a cautious approach to raising near-zero interest rates.
Yellen, preparing the ground for a rate increase as early as mid-year, stressed that although the economy was now growing steadily, the labor market still shows cyclical weakness and inflation continues to fall.
"A high degree of policy accommodation remains appropriate," Yellen told the Senate Banking Committee.
The Federal Open Market Committee, the Fed s policy board, still "considers it unlikely" that it will need to hike the federal funds rate "for at least the next couple of meetings," she said, effectively putting the earliest hike in mid-June.
"The Federal Reserve is in no rush to raise interest rates," Kathy Lien of BK Asset Management concluded.
"While the central bank governor expressed optimism about the economic outlook and inflation, she provided no signal on when interest rates would rise," Lien said.
"As a result, forex traders were sorely disappointed but equity and Treasury traders celebrated by sending stocks to record levels and Treasury prices higher."
The euro also was supported after eurozone finance ministers agreed that Greece s proposed reforms were sufficient to extend the debt-riven country s bailout, due to expire Saturday, to the end of June.
"Meaningful upside for the euro should remain a challenge given that Greece s stopgap debt measure only puts a momentary lid on the nation s debt woes. Fears of a Greek exit and bankruptcy could flare anew in the months ahead, which could cap interest in the euro," said Joe Manimbo, senior market analyst at Western Union Business Solutions.
