Dollar fluctuates as Yellen says turmoil may delay rate hikes

NEW YORK – The dollar fluctuated after Federal Reserve Chair Janet Yellen said continued market turmoil may throw the central bank off course from the multiple interest-rate increases that policy makers have forecast for 2016.

A gauge of the U.S. currency touched a two-month low as Yellen said the Fed still expects to raise rates gradually, according to prepared testimony to be delivered to the House Financial Services Committee.

“This is generally negative for risk appetite and therefore negative for the U.S. dollar,” said John Hardy, head of foreign- exchange strategy at Saxo Bank A/S in Hellerup, Denmark. “Markets were clamoring for more — look at the profound unwinding of Fed expectations.”

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, was little changed at 1,221.07 as of 8:50 a.m. in New York, after reaching the lowest level since December.

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“Financial conditions in the United States have recently become less supportive of growth,” Yellen said. “These developments, if they prove persistent, could weigh on the outlook for economic activity and the labor market.”

Yellen kept the door open for a rate increase in March, though she didn’t explicitly refer to any tightening timeline or the Fed’s next meeting.

Eight weeks after raising interest rates for the first time in nearly a decade, Fed officials are struggling to judge whether financial market turmoil and a dimmer outlook abroad undermine their U.S. forecast and the need for additional policy tightening. They next gather to consider a rate change on March 15-16.

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