Dollar gains ground on Yellen news

Investing.com - The dollar strengthened against the other major currencies on Wednesday after news that Janet Yellen is to be nominated to head the Federal Reserve, but concerns over the ongoing political deadlock in Washington held gains in check.

During European afternoon trade, the dollar recovered from recent lows against the yen, with USD/JPY advancing 0.42% to 97.27.

The dollar was boosted after the White House said President Barack Obama will announce his nomination of Federal Reserve Vice Chairwoman Janet Yellen to head the U.S. central bank later Wednesday.

Ms. Yellen’s nomination fuelled expectations Fed policy could remain accommodative for some time. If Ms. Yellen’s nomination is confirmed by the Senate, she will succeed Chairman Ben Bernanke, whose term ends January 31.

But investors remained cautious as a partial U.S. government shutdown dragged on into a second week, with few signs of progress towards a resolution ahead of an October 17 deadline to avoid a U.S. sovereign default.

President Obama repeated Tuesday that he will be only willing to enter negotiations with congressional Republicans after the government is reopened and the U.S. debt ceiling is raised without conditions.

The euro was also lower against the dollar, with EUR/USD down 0.45% to 1.3511.

Data released on Wednesday showed that German industrial production rose 1.4% in August, above expectations for a 1% gains and was 0.3% higher on a year-over-year basis.

Elsewhere, the pound fell to three week lows against the greenback, with GBP/USD dropping 0.72% to 1.5964 after data showed that U.K. industrial production fell at the fastest rate in nearly a year in August, rising doubts over the outlook for third quarter growth.

The Office for National Statistics said U.K. industrial production fell 1.1% in August, defying expectations for a 0.4% increase, after inching up 0.1% in July.

The ONS said manufacturing production fell by a seasonally adjusted 1.2% in August, confounding expectations for a 0.4% increase.

A separate report showed that the U.K.’s goods trade deficit narrowed to GBP9.63 billion in August from GBP9.94 billion in July, but analysts had expected the deficit to shrink to GBP9 billion.

The dollar gained ground against the Swiss franc, with USD/CHF rising 0.77% to 0.9107.

Elsewhere, the greenback was broadly lower against its Australian, New Zealand and Canadian counterparts, with AUD/USD up 0.33% to 0.9454, NZD/USD rising 0.21% to 0.8305 and USD/CAD easing up 0.13% to 1.0381.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.49% to 80.46.

Investors were awaiting the release of minutes from the Fed’s September meeting later Wednesday, after the U.S. central bank surprised markets with a decision to keep its stimulus program on track.