Investing.com - The dollar weakened against a basket of the other major currencies on Wednesday after Federal Reserve Chair Janet Yellen reiterated that the U.S. central bank will stick to a gradual approach when raising interest rates.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.19% to 95.32 by 08.49 AM ET, not far from the nine-month low of 95.22 plumbed in late June.
In prepared remarks released before her testimony to the House Financial Services committee, Yellen said the Fed is likely to unwind its stimulus despite low inflation.
"The Committee continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time to achieve and maintain maximum employment and stable prices."
Her testimony to the Senate Banking Committee will start at 10:00AM ET.
Yellen gave no clear indication of whether the Fed would raise interest rates a third time this year.
The Fed chair also emphasized that inflation is below target and noted that it is a particular "uncertainty" that could affect monetary policy.
USD/JPY was down 0.74% to 113.06 following the remarks, well below the four-month high of 114.49 set on Tuesday.
The euro was little changed against the dollar, with EUR/USD at 1.1469 after rising to a 14-month peak of 1.1489 overnight.
The Canadian dollar was steady against its U.S. counterpart, with USD/CAD at 1.2915 as investors awaited the outcome of the Bank of Canada meeting later in the day.
Many analysts think the BoC will hike interest rates for the first time in seven years after recent hawkish remarks from senior bank officials.
Meanwhile, sterling extended its recovery from two-week lows, with GBP/USD climbing 0.38% to 1.2896 after the latest UK jobs report showed that the jobless rate fell to a 42-year low in the three months to May, but pay growth continued to lag behind inflation
The pound weakened in early trade after Bank of England Deputy Governor Ben Broadbent said in an interview published on Wednesday that he is not ready to raise interest rates just yet.
The remarks indicated that the BoE is now almost certain to keep rates on hold at their current record lows at next month’s meeting.