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FOREX-Dollar slips in wake of Yellen testimony, yen climbs

Published 11/02/2016, 02:26 pm
Updated 11/02/2016, 02:30 pm
© Reuters.  FOREX-Dollar slips in wake of Yellen testimony, yen climbs
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* Dollar hits fresh 15-month lows vs yen

* Yellen sticks to 'gradual' rate hike path but warns of risks

* Japan & China shut for public holidays

By Masayuki Kitano and Ian Chua

SINGAPORE/SYDNEY, Feb 11 (Reuters) - The dollar hit a 15-month low against the yen on Thursday after comments from Federal Reserve Chair Janet Yellen gave investors no reason to change their minds that the next rate hike will be a long time coming.

Sticking largely to the script, Yellen made clear on Wednesday that the central bank remained on a path of 'gradual' policy tightening. Yet, she also highlighted growing risks facing the economy. gave currency investors the green light to continue the current trading theme - buy the safe-haven yen. As a result, the dollar slid below 113.00 yen for the first time since November 2014 and hit a 15-month low of 112.515 yen JPY= .

The dollar later pared some of its losses and was last trading at 112.97 yen, down 0.3 percent on the day.

"The idea that you will be okay if you buy the dollar since the United States alone will be raising interest rates, is becoming difficult to justify," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

The greenback hit a 3-1/2-month low against a basket of six major currencies. The dollar index touched a low of 95.508 at one point, its lowest level since Oct. 22, and was last trading at 95.812.

That trough marked a drop of nearly 5 percent from its 12-1/2-year peak set in early December when the consensus was for the Fed to keep raising interest rates this year.

The euro last traded at $1.1280 EUR= , down 0.1 percent on the day. It edged up to $1.1321 earlier on Thursday, nearing a 3-1/2-month high of $1.13385 set on Feb. 9.

Fed Chair Janet Yellen told U.S. lawmakers on Wednesday that the Fed is unlikely to reverse its plan to raise interest rates further this year. She added, however, that tighter credit markets, volatile financial markets, and uncertainty over Chinese economic growth have raised risks to the U.S. economy.

"While the Fed is in a waiting mode to see how those risks play out, we don't see Fed hikes being priced in again any time soon," analysts at BNP Paribas (PA:BNPP) wrote in a note to clients.

"In this environment USD is likely to continue to struggle against the G10 funders JPY and EUR, although we would also be wary of calling for significant dollar weakness against these currencies as we think the BOJ and ECB will remain sensitive to FX appreciation."

The softer greenback also saw commodity currencies firm slightly.

The Australian dollar edged up 0.1 percent to $0.7105 AUD=D3 , staying within a roughly 68-72 cent range seen since mid-January.

The moves in currencies came in holiday-thinned trade, with markets in Japan and China shut for public holidays.

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