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NZ dollar little changed as USA inflation data awaited

U.S. Dollar Index

The prepared statement by Janet Yellen repeats numerous previous statements: another hike and the balance sheet reduction are expected this week.

"I absolutely intend to serve out my term", she told a member of the House Financial Services Committee during a three-hour hearing. Even so, the rate remains in a still-low range between 1 percent and 1.25 percent.

"International investors are less likely to understand the nuances of USA political risk, and more likely to overreact".

Yellen said she and her colleagues on the Federal Open Market Committee "expect that, with further gradual adjustments in the stance of monetary policy, the economy will continue to expand at a moderate pace over the next couple of years, with the job market strengthening somewhat further and inflation rising to 2 percent".

"We think the testimony (from Yellen) will support the prevailing Fed view that it is on a clear path towards normalisation of monetary policy".

Luke Bartholomew, investment strategist at Aberdeen Asset Management, said Yellen's statement could make a another United States interest rate hike this year less likely.

Key events later this week include the appearance by Yellen, who will update lawmakers on the outlook for the USA economy and her expectations for additional interest rate increases in her twice-annual appearance before congressional committees.

Weekly AUDUSD
Weekly AUDUSD

Brent crude was down 0.7% to $47.77 a barrel. Yellen recently said that asset prices by some measures "look high, but there's no certainty about that". 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. Analysts predicted the size of the June gain would keep the Fed on track to raise rates again.

Yellen's testimony still noted that she expects gradual rate hikes to be appropriate over the next few years.

At the Fed's meeting last month, it outlined a plan to begin selling an initial amount of maturing bonds of no more than $6 billion a month in Treasury securities and no more than $4 billion a month in mortgage bonds.

The Dow Jones Industrial Average jumped more than 120 points to a fresh all-time high, small caps rallied more than 1% and emerging-market equities surged as Yellen expressed confidence in the American economy while suggesting inflation rates won't force the Fed's hand.

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

In prepared remarks to Congress, Yellen reiterated statements that Fed Governor Lael Brainard gave Tuesday, namely that rates are close to a "neutral" level and not in need of a significant move higher.