US Dollar Declines Against Euro as Anticipation Grows for Yellen Speech

The US dollar weakened against the euro and the British pound on Monday, as investors speculated the future road of monetary policy in the United States. Comments from New York Federal Reserve President William Dudley on Friday offered a dovish position on future interest rate hikes ahead of a speech by Federal Reserve Chairwoman Janet Yellen today.

Dudley, who is a member of the Federal Open Market Committee, said that the time when the Federal Reserve should start reducing its balance sheet is approaching closer. He added that the US central bank may take a break from raising its interest rates to work on shrinking the balance sheet, which took away some of the support the US dollar had. The greenback has been rallying in recent months, in part due to anticipation of higher interest rates.

The awaited speech of Yellen, which will take place at the University of Michigan, is expected to offer more clarity on the future road of the US monetary policy. The greenback will move lower if she backs Dudley’s stance, and could be further weighed down by a speech from Minneapolis Federal Reserve President Neel Kashkari, which is due tomorrow.

EUR/USD traded at 1.0593 as of 20:30 GMT on Monday, from 1.0604 at 16:05 GMT, the pair’s highest level today. EUR/USD began the week at 1.0587. GBP/USD was at 1.2412, from 1.2417 at 14:45 GMT, also the pair’s highest level for the day. GBP/USD started trading today at 1.2377.

The Dollar Index, which measures the performance of the US currency against a basket of its major peers, was at 101.08 as of 20:26 GMT, from 101.18 yesterday.

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