Dollar dips vs yen as Yellen dampens rate hike signal

Washington: The dollar dropped against the yen Monday as Federal Reserve Chair Janet Yellen signaled caution about raising interest rates following the disappointing May jobs report.

Friday`s shock employment report, showing the lowest job growth in nearly six years, was "concerning", Yellen said at an event in Philadelphia, but stressed her confidence that the economy remains in good health.

If the jobs market continues to strengthen and prices pick up, "further gradual increases in the federal funds rate are likely to be appropriate," she said.

The dollar gained 0.9 percent at 107.57 yen. The greenback, after a brief rise to $1.1326 per euro, slipped back to $1.1355, paring its losses from Friday.

Less than two weeks ago Yellen said that the US economy was improving enough to support a hike "probably in the coming months." She and other Fed officials had indicated a hike could come in June or July. 

Kathy Lien, head of currency strategy at BK Asset Management, said the overall tone of Yellen`s speech was less hawkish, not just because of the weak jobs report but also because she expressed concerns about China`s slowing economy and Britain`s upcoming vote on whether to exit the European Union.

"Her cautiousness along with the drop in the market`s expectations for a July rate hike according to the Fed fund futures points to further losses for the greenback," Lien said.

The pound remained under pressure as the clock ticks down for the June 23 Brexit referendum. Supporters of the "Leave" campaign moved ahead of the "Remain" contingent in the latest opinion polls on Monday.

The pound slid to $1.4353, a three-week low, before recovering to $1.4439 in late trade.

"It is becoming extremely worrying for the financial markets and expect more sterling losses if polls continued to indicate a Brexit lead," said Hussein Sayed, chief market strategist at trader FXTM.