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Dollar gains as Yellen says US economy strengthening

The dollar has edged higher against the euro after Federal Reserve Chair Janet Yellen said that the US economy was strengthening and the stimulus taper will continue steadily.

NEW YORK: The dollar edged higher against the euro on Wednesday after Federal Reserve Chair Janet Yellen said that the US economy was strengthening and the stimulus taper will continue steadily.

But the move upward against the euro and yen was tempered by Yellen's reiteration of the Fed's overall dovish stance, saying that the economy still needs the help of ultra-low interest rates and that there was still no threat from inflation.

She also cautioned over the still-high level of slack in the jobs market and the slowdown in the real estate market as reasons to keep policy highly accommodative.

"With the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already under way, putting the overall economy on track for solid growth in the current quarter," she told a congressional panel.

Paul Edelstein, economist at IHS Global Insight, said the testimony at least confirmed that the quantitative easing stimulus will be wound up late this year. He added that the Fed sees a full economic reversal requiring more stimulus as highly unlikely.

"For the Fed, the key domestic risk is now the housing recovery. But the baseline assumption is for a return to growth," he said.

Meanwhile expectations for the policy meeting of the European Central Bank Thursday were for no change in policy.

"We doubt that recent events and data releases have been significant enough to ensure more policy action from the ECB," said Jennifer McKeown at Capital Economics.

"We expect a very dovish tone from (ECB chief Mario) Draghi to hint that such action might be taken at the June meeting."

At 2100 GMT Wednesday     Tuesday

EUR/USD $1.3911                   $1.3929

USD/JPY 101.87 yen               101.66 yen

EUR/JPY 141.74 yen               141.60 yen

GBP/USD $1.6974                   $1.6868

EUR/GBP 0.8204 pound         0.8204 pound

USD/CHF 0.8761 franc           0.8740 franc

EUR/CHF 1.2188 euro            1.2173 euro

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