Dollar hits 4-month high vs yen, stocks slide

  • Dollar hits 4-month high vs yen, stocks slide

Dollar hits 4-month high vs yen, stocks slide

On Wednesday, Yellen will address the House Financial Services Committee and on Thursday the Senate Banking Committee.

The U.S. dollar rose in volatile trading on Wednesday, gaining ground after Federal Reserve Chairwoman Janet Yellen said that any subsequent interest rate increases would be gradual, and that they wouldn't need to rise much to reach a "neutral policy stance".

Overall consumer prices, as measured by the price index, increased 1.4 percent over 12 months through May, up from about 1 percent a year ago but a little lower than earlier this year. "Obviously that should say something to you about the risk that might mean, because we've never lived with it before".

Yellen noted that while the USA labor market has continued to strengthen and while the US economy appears to be growing at a moderate pace, the inflation has continued to run lower than the Fed's 2% long-term objective.

During semiannual testimony to Congress, she fielded questions on topics ranging from the subdued labor participation rate, the Fed's $4.5 trillion balance sheet and the effect of the financial regulations on community banks. Energy stocks also rose as the price of crude oil headed higher. Many economists believe the Fed, which has raised rates three times since December, will increase rates one more time this year. Yellen specifically said that this normalization plan is expected to begin this year.

Looking ahead, Yellen expects a strong economy. Likewise, business investment has accelerated, the Fed said after being weak for much of 2016, helped by a surge in spending on drilling and mining activity.

Higher US interest rates and Treasury bond yields raise the opportunity cost of holding gold, which yields nothing and costs money to store and insure.

"Additional gradual rate hikes are likely to be appropriate over the next few years to sustain economic expansion and return inflation to our 2 percent goal", she said.

Minutes of the FOMC meeting in June showed a camp of officials who saw benefits from allowing the unemployment rate to run below its long-run normal level - estimated at 4.6 percent, according to the median quarterly forecast last month - for a "sustained" period.

As the US economy is back on track for steady growth, Fed policymakers are preparing to unwind its crisis-era policies to avoid igniting inflation pressures or pumping up asset bubbles.

"In the Philippines, we will be watching the balance of trade data", Limlingan said.