* Trump national security aide Flynn resigns over Russian
* Yellen to testify to Congress on Tuesday, Wednesday
* Dollar edges down vs yen but well above last week's lows
* French election concerns continue to plague euro
By Yumna Mohamed
Feb 14 The dollar stumbled against major
currencies overnight after U.S. President Donald Trump's
national security advisor Michael Flynn quit under scrutiny over
whether he discussed the possibility of lifting U.S. sanctions
on Russia before Trump took office.
The dollar index retreated from three-week highs,
down over 0.2 percent as Flynn's resignation underscored the
persistent unpredicatability of Trump's administration, adding
to the air of caution as markets await Federal Reserve Chair
Janet Yellen's congressional testimony.
"We're still early into the new administration so we're yet
to get details of fiscal strategy and that's going to have an
important impact on how the Fed guides policy," said Simon
Derrick, chief market strategist with BNY Mellon in London.
Derrick pointed to the conciliatory tone struck by Trump's
meeting with Japanese Prime Minister Shinzo Abe over the
weekend. Abe said on Tuesday he agreed with Trump that currency
issues should be left for the finance leaders of each country to
"We had a little more detail about the conversation between
Trump and Abe and it seems the topic of currency hasn't gone
away so that adds a bit of caution to the dollar," he said.
The dollar weakened 0.2 percent to 113.56 yen, off
Monday's high of 114.17 but well above a 10-week low of 111.59
yen touched a week ago.
Investors are now waiting to see whether Yellen offers clues
to the pace of interest rate increases in her first of two
appearances at Senate Banking Panel on Capitol Hill this week.
Yellen will present the U.S. central bank's semi-annual
report on monetary policy and the economy in testimony to the
Senate Banking Committee on Tuesday, followed by a the
semi-annual monetary testimony before the House Financial
Committee on Wednesday.
"Overall, the market is looking for three things: is the Fed
still thinking about three rate hikes this year? Has anything
occurred that could de-rail this expectation? Will Yellen give
the markets a reality check by voicing some scepticism about
potential fiscal change under President Trump?" Kathleen Brooks,
research director at City Index, asked in a note.
Dallas Federal Reserve Bank President Robert Kaplan, a voter
this year on the Fed's policy-setting panel, said on Monday in
remarks prepared for posting to the Dallas Fed website that the
U.S. central bank should act soon to raise rates or risk having
to abandon its plan to do so slowly.
Interest rates futures showed investors pricing in only
about a 1 in 5 chance the Fed will increase rates at its meeting
next month, according to CME Group's FedWatch program.
The dollar also got a lift from Trump's promise last week of
a "phenomenal" tax plan that the White House said would include
tax cuts for businesses and individuals. The hopes raised by his
comments helped lift U.S. stocks to record highs on Monday.
The euro, which has come under pressure in recent sessions
on France's election campaign and Greek bailout talks,
benefitted from dollar weakness and was up 0.25 percent at
On Monday, the International Monetary Fund's chief Christine
Lagarde said Greece would not get a special sweetheart deal but
there were solutions to its debt problem.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Reporting by Yumna Mohamed; Editing by Angus MacSwan)