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Emerging Market Currencies Rally after Yellen Comments

The dollar extended its losses in Asia on Wednesday after Federal Reserve chief Janet Yellen stuck to a dovish stance on monetary policy, citing ongoing concerns about the global economy.

Yellen signaled U.S. interest rates were unlikely to rise before June, and that when the central bank does tighten policy, it will be slow and gradual. 

The Fed in December lifted rates for the first time in nearly a decade.

The top U.S. central banker's softer-than-expected tone surprised markets, sending the dollar down to 112.78 yen in New York from 113.61 yen in Tokyo earlier Tuesday, while the euro climbed to $1.1294 from $1.1180. 

On Wednesday the greenback fell further to 112.47 yen while the euro was at $1.1293.

The U.S. unit also tumbled against higher-yielding, or riskier, currencies from emerging markets.

The Australian dollar was 1.4 percent higher, the South Korean won surged 0.84 percent and the oil-linked Malaysian ringgit jumped 0.67 percent. The Indonesian rupiah, Philippine peso and Taiwan's dollar also booked healthy gains.

"Developments abroad imply that meeting our objectives for employment and inflation will likely require a somewhat lower path for the federal funds rate than was anticipated in December," Yellen said.

Her comments came after bullish remarks by some Fed regional presidents and a recent series of strong U.S. data -- including Friday's better than forecast fourth-quarter growth -- raised the prospect of an imminent rate hike.

"Yellen indicated that core Fed members take into account the global context more than regional officials," Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking, told Bloomberg News.

"A June rate hike would be difficult as global financial turmoil earlier this year affects the real economy with a time lag."

Source: Agence France Presse


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