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 Fed Chair Janet Yellen gives her first testimony before the House
Financial Services Committee at 1500 GMT, and will likely face
questions on the state of the labor market and the future pace of
tapering.
Dealers said the latest betting was that while the tone was likely
to be upbeat on the economy, Yellen would emphasize that rates were
set to remain near zero for an extended period.
Just the hope was enough to lift gold as much as 0.6 percent to
$1,283.66 an ounce, while the dollar lost a quarter of a cent to the
euro at $1.3665.
The dollar also dipped a touch to 102.10 yen though activity was
curtailed by a holiday in Japan.
The sharpest move came in the Australian dollar which tacked on half
a cent to $0.9005 after figures showed a broad improvement in
business activity combined with a near 10 percent annual increase in
home prices.
The local share market was further underpinned by a solid earnings
report from Australia and New Zealand Banking Group and added 0.5
percent.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7
percent, even as most of the main bourses in the region were subdued
on the day.
Wall Street had also been in a cautious mood, with the Dow up just
0.05 percent on Monday, while the S&P 500 added 0.16 percent.
Still, share values have been supported by solid earnings. With
about 69 percent of the S&P 500 having reported, 68 percent have
topped profit expectations, above the long-term average.
FED THEATER
Yellen appears before the Republican-controlled House of
Representatives Financial Services Committee on Tuesday and the
Democrat-controlled Senate Banking Committee on Thursday.
Analysts generally assume Yellen will stick with the script and
reiterate that the Fed will continue to scale back its asset buying,
as long as the economy improves as expected.
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"The testimony is likely to be more theatre than economics," said
Marshall Gittler, head of global FX strategy at online trader IronFx
Global.
"Yellen will probably try to remain polite and give upbeat,
optimistic answers that will play well on TV. In that respect her
testimony may present a favorable picture of the U.S. economy that
could boost the dollar."
One argument for staying the course on tapering is that bond
investors have learned to live with the idea without freaking out,
as they did a couple of times last year.
Yields on U.S. 10-year Treasury paper have settled back at 2.67
percent, well below recent highs of 3.04 percent and less of a
threat to the housing market.
Investors, too, have accepted that tapering is not the same as
tightening and have pushed out the timing of the first actual hike
in the Fed funds rate. A move is not fully priced in until late
2015, a view Yellen is likely to endorse.
In oil markets, prices steadied after recent gains as the market
looked toward the end of a long and frigid winter.
Brent was up 5 cents on Tuesday at $108.68 a barrel but off a
five-week high above $109. U.S. crude inched up 2 cents to $100.08,
after rising to its highest this year on Monday at $100.55.
(Editing by John Mair & Shri Navaratnam)
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