NEW YORK (Reuters): The high-flying dollar moved higher again after Federal Reserve Chair Janet Yellen said the worrisome U.S. labor markets requires policymakers to move cautiously when eyeing interest rate hikes.  The U.S. dollar index, which values the greenback against a basket of a half dozen major currencies, was up 0.31 percent after reaching a new 2014 high of 82.413. The euro was off 0.35 percent against the dollar at $1.323. 

Tensions over Ukraine increased and blunted a European stocks run-up, and U.S. Treasury yields edged up as Yellen spoke at a central bankers meeting in Wyoming.  U.S. stocks were mixed in morning trading.  The labor market is still bruised from the Great Recession and the Fed should move cautiously in determining when interest rates should rise, Yellen said. The jobless rate has fallen more quickly than expected, but Yellen said the economic disruption of the last five years has left millions of U.S. workers sidelined, discouraged or stuck in part-time jobs - facts not captured in the unemployment rate alone.  In such an environment “there is no simple recipe for appropriate policy,” Yellen said, arguing for a “pragmatic” approach that allows officials room to evaluate data as it arrives without committing to a preset policy path.  At the same time, she said the labor market may in fact be tighter than it seems and the Fed may have to raise rates sooner and faster than expected.

Higher interest rates tend to boost the allure of the dollar as they raise the yield on some U.S. assets.  “On balance, the speech was a very gradual and nuanced move away from Yellen’s overtly dovish policy stance in the past toward a more balanced view on the economy and on monetary policy,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.