Dollar Drops on Yellen Comments, China Shares Rise

• Dollar Drops on Yellen Comments, China Shares Rise

The dollar weakened after Janet Yellen said it’s prudent for the Federal Reserve to gradually adjust policy over time, while Chinese equities extended gains as the world’s second-largest economy grew faster than forecast. Gold climbed for a second day.

The greenback slipped against major peers after the Fed chief’s speech. The Shanghai Composite Index rose the most in almost two weeks as China’s gross domestic product accelerated for the first time in two years in the final quarter of 2016. Japan’s Topix index swung within a half-percentage-point range, while equities from Hong Kong to Jakarta slipped. Gold headed for a fourth straight weekly advance as investors await the opening days of Donald Trump’s presidency.

Rallies in the dollar and equities are easing this week before Trump is sworn in as the 45th American president, with investors growing increasingly anxious for indications the administration will follow through on pro-growth campaign promises. Legendary billionaire investor George Soros said the euphoria among stock investors since Trump’s victory will end as uncertainty takes over. The Dow Jones Industrial Average has churned in its tightest range ever over the past month.

“It’s clear that investors have reached a level where they are prepared to wait and see what the Trump administration has to offer,” said Ric Spooner, chief market analyst at CMC Markets Asia Pacific Ltd. in Sydney.

In a speech at the Stanford Institute for Economic Policy just a day before Trump’s inauguration in the U.S., Yellen argued that the Fed wasn’t behind the curve in containing inflation pressures but nevertheless can’t afford to allow the economy to run too hot. In a separate speech on Wednesday, Yellen said the Fed was close to achieving its goals of full employment and stable prices. The odds of another Fed rate hike as soon as May have risen to 50 percent from 42 percent a day ago, futures contracts show.

China’s economic data cemented an economic stabilization that’s giving leaders a buffer as they transition to neutral policy and prepare for potential trade tensions with Trump. GDP increased 6.8 percent in the three months through December from a year earlier, compared with a 6.7 percent median estimate in a Bloomberg survey.

Here are the main moves in markets:

Currencies

• The Bloomberg Dollar Spot Index retreated 0.3 percent as of 12:41 p.m. in Tokyo, after gaining as much as 0.1 percent earlier. The gauge is down 0.2 percent for the past five days, heading toward its fourth straight weekly loss. It touched the highest level in more than a decade earlier this month.
• The yen added 0.2 percent to 114.60 per dollar, wiping out a decline of 0.2 percent and almost reversing a loss for the week. The Australian dollar climbed 0.3 percent, also erasing earlier losses.

Stocks

• The MSCI Asia Pacific Index rose 0.3 percent, with about 500 stocks declining and 360 advancing.
• The Topix index fell as much as 0.2 percent and climbed as much as 0.3 percent. The gauge is headed for its fourth weekly decline in the past five weeks.
• The Shanghai Composite gained 0.5 percent. Hong Kong’s Hang Seng index fell 0.7 percent.
• Australia’s S&P/ASX 200 Index slipped 0.5 percent, heading toward the biggest weekly decline since early December.
• Futures on the S&P 500 Index rose 0.1 percent. The underlying cash index fell 0.4 percent to the lowest in two weeks on Thursday. The Dow declined for a fifth straight day, the longest losing streak since Trump’s election victory.

Commodities

• Gold rose 0.3 percent to $1,208.09 an ounce, on course for a fourth weekly climb. It’s up 0.9 percent this week, touching the highest level since November.

Bonds

• The yield on 10-year Treasuries fell two basis points to 2.45 percent, retreating after a two-day rally.