Dollar subdued as Yellen drives home message of patience

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SYDNEY (Reuters) - The dollar started trade on Monday pretty much where it closed in New York after the head of the U.S. central bank assured investors that the path back to 'normal' interest rates will only occur at a gradual pace.

The dollar fetched 119.24 yen versus 119.11 late in New York on Friday. It has fallen more than 2 percent from a near eight-year peak of 122.04 set early this month.

The euro was also little changed at $1.0889, having in the last two weeks pulled up from a 12-year trough of $1.0457.

In a highly anticipated speech late Friday, Fed Chair Janet Yellen outlined the case for a 'gradualist approach' to rate hikes, in comments mirroring those at the post-FOMC meeting on March 18.

She said policy tightening could "speed up, slow down, pause, or even reverse course" depending on actual and expected developments in the economy.

"Yellen went to great length to detail why rate hikes would not be rushed and ultimately may not reach levels previously considered to be 'normal'," said Ray Attrill, global co-head of FX strategy at National Australia Bank.

"Our take is that while rates may rise sooner and faster than current market pricing, they are more likely to undershoot than overshoot the Fed's latest median 'dot point' trajectory."

The diverging interest rate pathways between the Fed and most of the developed world meant that the dollar should in general stay supported.

Commodity currencies were notable underperformers in early trade, partly unsettled by further falls in oil and iron ore prices last Friday.

"Iron ore hit a fresh record low amid supply glut worries, while oil slid 5 percent.The Aussie eased to $0.7733, continuing to retreat from a two-month peak of $0.7939 set a week ago"Iron ore hit a fresh record low amid supply glut worries, while oil slid 5 percent.

The Aussie eased to $0.7733, continuing to retreat from a two-month peak of $0.7939 set a week ago. It was nearing a six-year trough of $0.7561 plumbed early this month.

Traders said there is little prospect for volatility in Asia on Monday, given a dearth of market-moving data out of the region. U.S. jobs data due on Friday is shaping up to be a key event for this week.

(Editing by Eric Walsh)

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