US dollar rises after Draghi comments, investors await Yellen speech

[NEW YORK] The US dollar hit a one-month high against the yen and rebounded against the euro on Monday after the European Central Bank chief defended the ECB's easy monetary policy, and as investors awaited Federal Reserve Chair Janet Yellen's speech on Tuesday.

ECB President Mario Draghi, speaking to university students in Lisbon, said super low rates create jobs, foster growth and benefit borrowers, ultimately easing inequality.

The euro fell earlier this month after the ECB said policymakers had not discussed scaling back its massive bond-buying programme.

The euro, which hit a more than one-week high against the US dollar of US$1.1219 earlier in the session after weaker-than-expected US May durable goods orders data fuelled doubts about the US economy and the Federal Reserve's aggressive rate increase outlook, eased after Mr Draghi's remarks.

"Draghi pouring water on expectations of reducing monetary stimulus, that saw the euro then start to weaken," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York.

Fed Chair Yellen is set to deliver a speech in Europe on Tuesday. Analysts said traders were expecting Ms Yellen to maintain a positive outlook on the US economy despite a recent batch of weak US economic data, thereby supporting the Fed's forecast of raising interest rates once more this year and three times next year.

Those expectations helped the US dollar gain against a basket of major currencies. The US dollar hit a one-month high against the yen of 111.93 yen. The US dollar index, which measures the greenback against a basket of six major rivals, was last up 0.2 per cent at 97.440.

The risk that Ms Yellen could tweak her outlook in a more dovish direction kept traders on tenterhooks and limited the US dollar's gains.

Worries have grown that an acceleration in economic growth in the second quarter may not be as robust as expected. Recent data on retail sales, manufacturing production and inflation have given pause and housing data has been mixed.

"We'll know more from Yellen tomorrow," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Group Ltd in New York.

"Traders are still split on what the Fed is going to do."

The euro was last down 0.1 per cent against the US dollar at US$1.1179. The US dollar fell against emerging market currencies, however, partly on a reach for higher-yielding alternatives to the greenback amid low volatility. The US dollar was last down 1.3 per cent against the Brazilian real at 3.2998 reais.

REUTERS