July 12, 2017 / 3:15 PM / 12 days ago

FOREX-Dollar stronger on Fed's Yellen's testimony

3 Min Read

* Yellen: Economy healthy enough for gradual rate rises

* Bank of Canada raises rates, says data will decide future moves

* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh (Updates with U.S. market open; changes dateline; previous LONDON)

By Saqib Iqbal Ahmed

NEW YORK, July 12 (Reuters) - The dollar rose against a basket of major currencies on Wednesday after the release of prepared remarks from Federal Reserve Chair Janet Yellen that said the U.S. economy is healthy enough to absorb further gradual rate increases and the slow wind-down of the Fed's bond portfolio.

The remarks, released in advance of testimony to Congress on Wednesday at 10:00 a.m. EDT (1400 GMT), however, said the Fed would not need to raise rates "all that much further" to reach current low estimates of the neutral fed funds rate.

"Citing continued job and economic growth along with negative inflationary impacts that are believed to be transitory in nature, Yellen outlined in her congressional testimony the Fed's belief that the current monetary stance will be continued," Sean Coakley, market strategist at Cambridge Global Payments in Vancouver, said in a note.

The Fed raised rates last month to a range of 1 percent to 1.25 percent, and market expectations are roughly of a 50 percent probability that interest rates will rise again before the end of the year, according to the CME's Fed watch data.

The dollar, which fell against the euro soon after the release of the remarks, reversed course and was trading near session highs against the common currency, as government bond yields in the euro area fell.

"I think the market had initially misread Yellen’s comments. I don’t see them as being dovish," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

The dollar index, which tracks the greenback against six major rivals, was up 0.09 percent to 95.753, after briefly falling to 95.511, its lowest since June 30.

"This could be a potentially positive technical development, that we tested a low and not make a new one," Chandler said.

Meanwhile, the Canadian dollar rose against its U.S. counterpart after the Bank of Canada raised interest rates for the first time in nearly seven years, citing confidence in its outlook and a need to look through soft inflation.

The loonie strengthened to $1.2812, its strongest against the U.S. dollar since August 2016.

Slightly-better-than-expected wages and jobs data saved Britain's pound from another downward lurch on Wednesday, offsetting a series of political and economic warning signs as talks on leaving the European Union get going in earnest.

Sterling was up 0.33 percent to $1.2887. (Reporting by Saqib Iqbal Ahmed; Editing by Jonathan Oatis)

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