The last leg of weakness in the dollar index also came after the late February G-20 meeting in Shanghai, stirring speculation of a "Shanghai Accord" in which global policymakers secretly agreed to halt the dollar's rise and prevent a negative spiral of weaker and weaker global currencies. The official commentary following the meeting maintained that no country would competitively devalue its currency.
Conspiracy theories aside, Yellen's specific mention of China and its currency in her latest speech suggests to some analysts that the Fed is focused on the dollar and the feedback of its actions on the global economy.
Jefferies' Chief Market Strategist David Zervos said in a note last Wednesday that Yellen took what he termed as the "CHEXIT trade" off the table in an effort to prevent financial market turmoil. "The reason I want to start calling it CHEXIT is the same reason we talk about GREXIT, BREXIT or FREXIT — it is the breakdown of union. In this case it is a currency union between the two largest economies in the world, China and the U.S.," he said.
"The big question in the months ahead centers on the European and Japanese responses to all this," he said.
In midday trade Tuesday, the yen traded around 110 yen against the dollar, its strongest since October 2014, while the euro was near $1.139 after recently topping $1.14 to its highest in nearly half a year.
With the Fed still on track to raise rates, HPM's Pace expects the U.S. dollar index to strengthen over the long term, while Vamvakidis projects the euro will reach parity with the dollar by the end of the year.
But as the second quarter kicks off, Vamvakidis expects muted currency moves in the near term.
As analysts say the Fed appears to be buying time for China to stem negative spillover, the country has shifted from making drastic currency moves to taking new efforts to promote capital market development. That includes implementing debt swap programs and, in a rare move, allowing state-owned steelmaker Dongbei Special Steel to default on a short-term note last week.
"It seems they want to focus for a while at least on potentially bad or potentially nonperforming debt and potentially come back to the currency later," said Paul Christopher, head global macro strategist at Wells Fargo Investment Institute.
In a nod toward the impact of the yuan, Yellen talked about China's shift away from a manufacturing economy and dedicated an entire paragraph of her prepared text last week to China.
"There is much uncertainty, however, about how smoothly this transition will proceed and about the policy framework in place to manage any financial disruptions that might accompany it," she said. "These uncertainties were heightened by market confusion earlier this year over China's exchange rate policy."
Yellen is scheduled to speak again on Thursday, along with former Fed chairs Ben Bernanke, Alan Greenspan and Paul Volcker.
Talk of global developments strays from the Fed's traditional dual mandate of keeping the domestic labor market healthy and inflation in check. But some embrace the attention on global markets.
It's a "welcome acknowledgement we don't live in a vacuum," said Scott Clemons, chief investment strategist at Brown Brothers Harriman.
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"It's not healthy to have China on the fringes pursuing their own policy system without regard to the global implications," he said.