US dollar gains as Yellen eyes rate hike by year's end

[NEW YORK] The dollar rallied Thursday after US Federal Reserve Chair Janet Yellen said she still expects the central bank to lift benchmark interest rates in 2015.

Ms Yellen, in a speech at the University of Massachusetts, Amherst, said improvements in the US economy "will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter." The Fed chief's remarks came a week after the US central bank opted at a widely anticipated meeting against enacting the first rate hike since 2006.

Ms Yellen said policymakers continue to monitor overseas developments, but do not expect weaker conditions in China or elsewhere to derail a rate hike.

Ms Yellen's remarks pushed the euro to US$1.1172 near 2200 GMT, compared with US$1.1230 shortly before she spoke about an hour earlier.

The US currency moved up to 120.29 yen, compared with 120.04 before the speech. The greenback also gained on the Swiss franc and British pound.

Ms Yellen's remarks were "significant in that it does indicate they're going to move forward and raise rates this year," said Kathy Lien, managing director at BK Asset Management.

"She made a pretty strong argument that rates are going to rise this year."

AFP