Investing.com - The euro extended gains against the dollar on Monday following dovish comments from Federal Reserve Chair Janet Yellen, who said that stimulus measures will still be needed for some time.
EUR/USD was up 0.35% to 1.3799, after falling to lows of 1.3720 earlier in the session.
The pair was likely to find support at 1.3720 and resistance at 1.3825.
The dollar slipped after Ms. Yellen said that “considerable slack” still remained in the labor market and reiterated that the Fed’s commitment to economic stimulus will still be needed for some time. The remarks came during the Development conference in Chicago.
Separately, a report showed that manufacturing activity in the Chicago region expanded at a slower rate than forecast in March, as new orders fell.
The Chicago purchasing managers’ index fell 55.9 from 59.8 in February. Analysts had expected the index to tick down to 59.0.
The euro moved broadly higher earlier in the trading day, despite data showing that the rate of inflation in the euro zone fell to the lowest level since November 2009 this month.
Eurostat said the annual rate of consumer inflation slowed to 0.5% from 0.7% in February, undershooting expectations for a reading of 0.6%. The European Central Bank targets an inflation rate of just under 2%.
The report showed that core inflation rose 0.8% in March, in line with forecasts, but down from 1.0% in February.
The weak data fuelled expectations that the European Central Bank could take steps to bolster the fragile recovery in the euro area at its upcoming policy meeting on Thursday. Last month the central bank left rates on hold, but indicated that it was prepared to take decisive action if the inflation outlook continued to deteriorate.
The euro fell to one-month lows against the dollar last week after ECB officials indicated that they are considering fresh policy options to stave off the risk of deflation in the region.
However some investors expect the ECB to leave monetary policy on hold on Thursday, after Bundesbank head Jens Weidmann said Saturday that the euro zone is not in a deflationary cycle, and that the slowdown was due in large part to temporary factors, such as falls in food and energy prices.
The euro rose to more than two-week highs against the yen, with EUR/JPY rising 0.65% to 142.32.
Demand for the safe haven yen was hit as risk appetite was bolstered by hopes that China will act to shore up economic growth following comments by Chinese premier Li Keqiang on Friday.
The shared currency was also higher against the pound, with EUR/GBP rising 0.28% to 0.8286.
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