NEW YORK The U.S. dollar hit its lowest level against the euro in over a week on Tuesday and fell against other major currencies after Federal Reserve Chair Janet Yellen said it was appropriate for the Fed to proceed "cautiously" in hiking interest rates.
In her first comments since the Fed decided to hold rates steady two weeks ago, Yellen sounded cautious about threats to the recovery of the world's biggest economy, appearing to push back against more hawkish recent comments from a handful of her colleagues.
Yellen's comments hurt the dollar by pushing out expectations for the central bank's next interest rate hike. U.S. Fed funds futures implied traders saw a 43-percent chance of the central bank hiking rates in July, down from 51 percent on Monday.
The euro EUR= rose nearly 1 percent against the dollar to$1.1302, crossing $1.13 for the first time in 11 days, and was set to post its biggest one-day percentage gain against the greenback in nearly two weeks.
"It was definitely dovish," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago, in reference to Yellen's speech at the Economic Club of New York. "This is another push in the direction of fewer interest rate increases."
In contrast to Yellen's cautious remarks, Philadelphia Fed President Patrick Harker said last week that the central bank should consider another rate hike as early as next month and that he would prefer at least three hikes before year-end. Atlanta Fed President Dennis Lockhart said the United States may be in line for a rate hike as soon as April.
"Given the much less dovish-than-expected commentary we got from a number of Fed speakers last week, many were looking for a shift in tone from Ms. Yellen and we didn't get that," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
The dollar hit an 11-day low against the Swiss franc of 0.9661 franc CHF=. The dollar index .DXY, which measures the greenback against a basket of six major currencies, hit an eight-day low of 95.103 and was last down 0.83 percent at 95.145.
(Reporting by Sam Forgione; additional reporting by Dion Rabouin; Editing by Richard Chang and Nick Zieminski)