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New York -The euro gained against the dollar on Tuesday after a dovish speech by Fed chief Janet Yellen, while the yen fell on a disappointingly small rise in the Tankan business survey.
Yellen's maiden speech as Federal Reserve chair on Monday with its strong emphasis on the need to bring down unemployment significantly reinforced expectations that the federal funds interest rate would not begin rising until late next year.
That put a sell sign on the dollar which was backed up by some improved manufacturing data from Europe.
At 23:00 GMT the euro was at $1.3793 compared to $1.3772 late on Monday. Earlier it jumped over the $1.38 level.
"The talk is that this move was primarily fuelled by stronger-than-anticipated economic data out of the European region as well as follow-through from dovish comments made by Yellen," said Jonathan Terela at Western Union Business Solutions.
The Markit Eurozone manufacturing purchasing managers' index for March fell to 53.0 from February's 53.2 but for market-watchers it demonstrated that the regional economy is holding up.
The euro's move higher came two days before the European Central Bank reviews its policy, with the market dropping earlier expectations of a move to ease rates to address low inflation.
"Although there has been some talk around a potential rate cut in order to fight deflation the market has all but priced this possibility out," said Terela.
The yen suffered after the quarterly Tankan index of sentiment at large manufacturers crept up to 17 from 16, less than expected and showing that Japanese businesses remain cautious about the future.
The closely watched survey pointed to tepid investment among major firms and slumping sentiment for the April-June quarter possibly due to Japan's sales tax rise which came into effect on Tuesday.
The dollar rose to ¥103.66 from 103.22, while the euro traded at ¥142.98 compared to 142.15 late on Monday.
The British pound slipped to $1.6628 from $1.6664, while the dollar fell to 0.8833 Swiss franc from 0.8844.
