Dollar under pressure as Fed chief signals slow rate hike

Tokyo - The dollar weakened on Thursday as Federal Reserve chief Janet Yellen pointed to weakness in the US economy and cautioned that any rises in interest rates would be slow.

The greenback eased to ¥123.14 in Tokyo from ¥123.43 in New York.

The euro ticked up to $1.1362 from $1.1335 and to ¥139.92 from ¥139.91 despite rising fears over a Greek debt default as eurozone finance ministers prepare to meet later in the day.

"The Fed meeting was deemed a bit more dovish than expected so the US dollar has taken a bit of a back seat," Stan Shamu, a market strategist at IG, told Bloomberg News.

"The euro has been a big beneficiary of that move, but heading into the Eurogroup meeting tonight, it will remain something that a lot of traders will be sceptical about getting involved in."

After a two-day meeting, the Fed on Wednesday held off hiking rates but altered its outlook for future rises, expecting a lower upward curve than previously forecast.

In a news conference, the bank's head Janet Yellen said its first interest rate hike in nine years would likely come "later this year".

However, she added: "My colleagues and I would like to see more decisive evidence that a moderate pace of economic growth will be sustained, so the conditions in the labour market will continue to improve and inflation will move back to 2%."

She also voiced concern about Greece's debt crisis, warning the world economy could see significant turmoil if Athens did not reach an agreement with its creditors on overhauling its bailout.

Failure to hammer out a deal before a debt repayment deadline at the end of the month would see it default and possibly crash out of the eurozone.

The Greek central bank also warned that failure would start "a painful course that would lead initially to a Greek default and ultimately to the country's exit from the euro area and - most likely - from the European Union".

The comments come as finance ministers from the 19 eurozone countries prepare to meet in Luxembourg later on Thursday, although several officials said they were not expecting a breakthrough.