Dollar Weakening After Yellen Stresses Need For Caution
The dollar is losing ground against all of its major rivals Tuesday afternoon. The U.S. currency began to weaken after Federal Reserve Chair Janet Yellen's highly anticipated speech to the Economic Club of New York this afternoon.
The Federal Reserve anticipates that only gradual increases in the federal funds rate are likely to be warranted in coming years, the nation's top central banker said Tuesday.
Yellen acknowledged that it is 'too early' to say if pickup in core inflation will prove durable. Amid low oil prices, she continues to expect overall PCE inflation for 2016 to come in "well below" the Fed's 2 percent objective.
Given the risks to the outlook due to global problems, "I consider it appropriate for the Committee to proceed cautiously in adjusting policy," she said.
Recent remarks by Fed officials had increased speculation that the Fed could raise interest rates at its next meeting in April.
In a speech in Singapore early this morning, San Francisco President John Williams said he sees continued economic growth in the U.S. and shrugged off concerns about the global situation.
"Growth expectations may be slightly tempered, but that's a far cry from the triage bay we were in eight years ago," Williams said.
"My view is essentially, let's just stay on track," he added. "Let's not get sidelined by the noise and distraction commentary can sometimes cause."
Home prices in the U.S. continue to climb at more than twice the rate of inflation, Standard & Poor's revealed in a report released on Tuesday, although the annual rate of home price growth in January missed economist estimates.
The report said the S&P/Case-Shiller 20-City Composite Home Price Index for January was up by 5.7 percent compared to the same month a year ago. The annual growth in December was downwardly revised to 5.6 percent.
Economists had expected the rate of home price growth in major metropolitan areas to accelerate to 5.8 percent from the 5.7 percent originally reported for the previous month.
After reporting a notable deterioration in U.S. consumer confidence in the previous month, the Conference Board released a report on Tuesday showing a rebound in confidence in the month of March. The Conference Board said its consumer confidence index climbed to 96.2 in March from an upwardly revised 94.0 in February.
Economists had expected the confidence index to rise to 94.0 from the 92.2 originally reported for the previous month.
The dollar has dropped to over a 1-week low of $1.1275 against the Euro this afternoon, from an early high of $1.1168.
The European Central Bank can ease policy further, if necessary, but there is little room for reducing interest rates, ECB Governing Council member Jozef Makuch said Tuesday.
The interest rate cut as a policy tool is almost exhausted and further reductions will have less effect, the policymaker, who heads the National Bank of Slovakia, said.
The referendum on the United Kingdom's membership in the EU is the most significant near-term domestic risks to financial stability, the Financial Policy Committee of the Bank of England said Tuesday.
The FPC judged that the outlook for financial stability has deteriorated since it last met in November 2015. The bank today published the record of the FPC meeting held on March 23.
Risks associated with domestic credit are no longer subdued, and global risks, which can also affect UK exposures indirectly, are heightened, the bank said.
The buck has fallen to a 1-week low of $1.4390 against the pound sterling Tuesday afternoon, from a high of $1.4191 this morning.
The greenback has dropped to around Y112.800 against the Japanese Yen this afternoon, from an early high of Y113.801.
The average of household spending in Japan advanced 1.2 percent on year in February, the Ministry of Internal Affairs and Communications said on Tuesday, standing at 269,774 yen. That topped expectations for a decline of 1.9 percent following the 3.1 percent contraction in January.
The unemployment rate in Japan came in at a seasonally adjusted 3.3 percent in February, the Ministry of Internal Affairs and Communications said on Tuesday. That was higher than forecasts for 3.2 percent, which would have been unchanged.
Retail sales in Japan were up 0.5 percent on year in February, the Ministry of Economy, Trade and Industry said on Tuesday. That was well shy of expectations for an increase of 1.6 percent following the 0.2 percent decline in January.
Japan's small business confidence improved for the second straight month in March, survey figures released by the Shoko Chukin Bank showed Tuesday. The small business confidence index rose to 48.8 in March from 47.9 in February. Nonetheless, the score is below the expected level of 49.
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