Dollar wary ahead of Testimony from Fed’s Yellen

The dollar was almost flat against the yen and the euro in Asian trade Monday, with investors avoiding taking strong positions ahead of Federal Reserve Chairwoman Janet Yellen’s testimony before Congress later this week.

The dollar USDJPY, +0.22% was at ¥118.99 from ¥119.07 late Friday in New York.

The euro EURUSD, -0.46% was at $1.1370 from $1.1378 and was at ¥135.31 from ¥135.50.

The risk averse mood has taken a breather with an agreement for a four-month extension of a Greek bailout. The situation also cleared up with the Japanese stock market renewing a fresh 15-year high in the morning.

By Monday, Greece has to present a list of budget cuts and economic overhauls that have to pass the scrutiny of its lenders – the European Commission, the European Central Bank and the International Monetary Fund.

The greenback was changing hands in a tight range since the beginning of the Asian trade, as investors are cautiously wait for Fed Chairwoman Janet Yellen’s testimony before Congress Feb. 24-25.

After being trapped in a tight range, “we may get an answer if the dollar and the yen drift apart either to the upside or downside,” said Takuya Kanda, senior researcher at Gaitame.Com Research Institute, who expects the dollar will likely move in a ¥117.00-¥120.50 range later this week.

But noting that the higher dollar against the yen will likely persist for some time, “even if it swings downward, I think that it is only temporarily.”

Taisuke Tanaka, chief FX strategist at Deutsche Securities, said in a note that the dollar still lacked upward momentum strong enough to breach the ¥120-mark but is well supported around Y119 owing to dip buying by Japanese investors and importers.

Unlike other central banks, he said the Fed is unlikely to go ahead with raising rates before the market factors in such a move. And like the Fed, which will be patient before raising interest rates, “the dollar may need the patience to wait over the next several weeks for the right time to try new highs over ¥122,” Tanaka added.

Investors shrugged off minutes from the Bank of Japan’s Jan. 20-21 policy board meeting released earlier Monday.

Many Bank of Japan board members said last month that the public’s conversion from a deflationary mindset was progressing, keeping in check speculation over further easing amid falling inflation.

The WSJ Dollar Index BUXX, +0.44% a measure of the dollar against a basket of major currencies, was up 0.03% at 85.50.

Source: MarketWatch