The dollar erased losses as Federal Reserve Chairman Janet Yellen said more work is needed to restore the labor market to health while pledging to maintain her policies by scaling back stimulus in “measured steps.”
The U.S. currency was little changed as analysts said a report this week will show retail sales stalled last month, while the Fed last month voted for another reduction in its monthly bond-buying. The Australian dollar climbed to a four-week high after home prices and business sentiment improved. A gauge of major currency volatility rose from the lowest in more than two weeks.
“Some of her comments are slightly dovish, but you can clearly see that Yellen still considers tapering the right policy,” Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc., said in a phone interview. “With the weak data we got in recent weeks, some part of the market might’ve thought the Fed would be willing to slow the pace of tapering. But she’s made it clear that’s not the case.”
The Bloomberg Dollar Spot Index, which monitors the greenback against 10 major counterparts, was little changed at 1,024.03, at 9:50 p.m. New York time, after touching the lowest level since Jan. 14.
The U.S. currency gained 0.1 percent to $1.3641 per euro. It added 0.1 percent to 102.36 yen. The euro strengthened 0.1 percent to 139.62 yen.
The JPMorgan G7 Volatility Index was at 7.92 percent after falling to 7.79 percent yesterday, the lowest since Jan. 23.
Kazakhstan’s central bank devalued the tenge by the most in five years as reduced stimulus by the Fed led to capital outflows from emerging markets. The currency will be allowed to trade at 185 per dollar, with a range of 3 tenge on either side, the National Bank of Kazakhstan said in an e-mailed statement today. That indicates a devaluation of 16 percent from 155.63 per dollar at the close yesterday.
The tenge plunged 19 percent to 184.52 per dollar after falling 20 percent to 186.02, the biggest decline since February 2009.
The South African rand gained versus all 16 of its most-traded peers after the country’s jobless rate fell and manufacturing expanded more than economists expected. The currency strengthened 0.7 percent to 11.0590 per dollar.
The British pound rose versus the majority of its major counterparts after an industry report showed U.K. retail sales growth accelerated in January, adding to evidence a recovery is gaining momentum. Sterling appreciated 0.2 percent to $1.6438 after rising 0.4 percent to $1.6471, the highest since Jan. 31.
The Aussie rose the most in a week as statistics bureau data showed today house prices surged 9.3 percent in the final quarter of 2013 from a year earlier, the biggest increase in more than three years. Business confidence climbed in January for the first time in four months, a National Australia Bank Ltd. report showed.
“The Aussie dollar cracked above the 90 level on the back of the business confidence data, and generally, sentiment for the currency is becoming less negative,” said Mitul Kotecha, the Hong Kong-based global head of foreign-exchange strategy at Credit Agricole Corporate & Investment Bank SA.
Australia’s currency climbed 0.7 percent to 90.11 U.S. cents after reaching the highest since Jan. 14.
The Aussie has risen 1.8 percent this year, the biggest advance after the yen and New Zealand dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The Japanese currency has gained 3.5 percent and the dollar 0.5 percent, while the euro lost 0.2 percent.
Economists in a Bloomberg survey predict a report tomorrow will show imports by China, the world’s second-largest economy, climbed 4 percent last month from a year earlier after an 8.3 percent gain in December. The data comes after the Lunar New Year holiday between Jan. 31 and Feb. 6.
Yellen delivered her first public remarks as Fed chairman as policy makers pursue plans to gradually scale back the unprecedented bond-purchase program she helped put in place. She repeated the Fed’s outlook for further reductions in “measured steps” and that asset purchases aren’t on a “pre-set course.”
The Federal Open Market Committee said in January it will cut monthly bond purchases by $10 billion to $65 billion, citing labor-market indicators that “were mixed but on balance showed further improvement”.
U.S. retail sales stagnated in January after a 0.2 percent gain the month before, according to the median estimate of economists surveyed by Bloomberg News before the U.S. Commerce Department reports the data on Feb. 13. The Labor Department said on Feb. 7 hiring in the U.S. rose by 113,000 in January, fewer than the 180,000 gain forecast by economists.
The dollar will strengthen to $1.34 per euro and 105 per yen by the end of March, according to the median estimate in Bloomberg surveys of analysts.