Investing.com - The greenback traded mixed to lower on Tuesday after Federal Reserve Chair Janet Yellen told U.S. lawmakers that policy will remain accommodative even as monetary authorities taper stimulus programs that weaken the dollar to boost the economy.
In U.S. trading on Tuesday, EUR/USD was down 0.05% at 1.3638.
In prepared remarks to the House Financial Services Committee, Fed Chair Yellen suggested that the central bank would taper the pace of its asset purchases at future meetings if the economy continued to improve as expected, which gave the dollar some support.
“Let me emphasize that I expect a great deal of continuity in the Federal Open Market Committee’s approach to monetary policy,” she said.
Still, Yellen added that the pace of the central bank’s bond purchases are not on a “preset course” and reiterated that the Fed plans to hold interest rates near zero “well past” the time the jobless rate falls below 6.5%.
Weakening the greenback, however, were Yellen's observations that "the recovery in the labor market is far from complete" despite progress seen over the last year, describing the country's 6.6% unemployment rate as "well above levels" that Fed officials consider sustainable in a healthy economy.
The Fed is currently purchasing USD65 billion in Treasury holdings and mortgage debt a month to suppress interest rates to spur recovery, and Yellen's words, while in line with market expectations, kept sentiments firm that monetary authorities will trim asset purchases on a gradual basis, while tightening remains far off on the horizon.
The dollar saw support on expectations for further cuts to the Fed's bond-buying program, though demand for risk-on assets like stocks — the product of Yellen's consistent policy stance since Ben Bernanke's departure — enticed investors out of safe-haven dollar positions that, in turn, weakened the currency.
The dollar was up against the yen, with USD/JPY up 0.37% at 102.65, and up against the Swiss franc, with USD/CHF up 0.15% at 0.8982.
The greenback was down against the pound, with GBP/USD up 0.30% at 1.6450.
The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.45% at 1.105607, AUD/USD up 0.98% at 0.9038 and NZD/USD up 0.76% at 0.8328.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.01% at 80.70.