Dollar strengthens on Yellen Fed news

Investing.com - The dollar was higher against the other major currencies on Wednesday, as news that Janet Yellen will be nominated to head the Federal Reserve supported the greenback, offsetting worries over the U.S. debt ceiling.

During U.S. morning trade, the dollar recovered from recent lows against the yen, with USD/JPY rising 0.33% to 97.18.

The dollar found support after the White House said President Barack Obama would announce his nomination of Federal Reserve Vice Chairwoman Janet Yellen to run 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 continued into a second week, with few signs of a breakthrough, ahead of an October 17 deadline to raise the limit on federal debt borrowing and avoid a default.

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

The euro was 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 was sharply lower, with GBP/USD dropping 0.98% to 1.5926 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 advancing 0.68% to 0.9100.

Elsewhere, the greenback was broadly lower against its Australian, New Zealand and Canadian counterparts, with AUD/USD up 0.23% to 0.9445, NZD/USD rising 0.23% to 0.8305 and USD/CAD climbing 0.29% to 1.0399.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.50% to 80.48.

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.