The dollar and prices on global equity markets rose yesterday after Federal Reserve Chair Janet Yellen said she expects the US central bank to continue trimming its bond purchases, a sign the Fed believes the economy is on track for further growth.

Equity markets surged and the US currency trimmed losses against the euro and gained against the yen after the release of Yellen’s written testimony for her appearance before the House Financial Services Committee.

Yellen said recent volatility in global financial markets did “not pose a substantial risk to the US economic outlook” and reiterated that the Fed was on track to keep reducing its economic stimulus.

A potential headwind for investors appeared o be removed after Republican leaders in the US House of Representatives agreed to advance legislation raising Washington’s borrowing authority without conditions.

Stocks in Europe, emerging markets, Canada and on Wall Street rallied as Yellen emphasised continuity in the Fed’s policy strategy, saying she strongly supports the approach of her predecessor, Ben Bernanke.

“The last thing she wants to do at this point is complicate things or muddy a well-established message. ‘Do no harm’ is her motto unless the data changes more than we have seen so far,” said Brad McMillan, chief investment officer at Commonwealth Financial in Waltham, Massachusetts.

MSCI’s all-country world index, which measures stock performance in 45 countries, rose 0.89 per cent, and its emerging markets index gained 1.08 per cent.

In Europe, the FTSEurofirst 300 index of leading regional shares closed up 1.25 per cent at 1,317.30. Stock markets in Brazil and Mexico jumped almost two per cent, while Bay Street in Toronto rose 0.74 per cent.

On Wall Street, the Dow Jones industrial average rose 144.43 points, or 0.91 per cent, at 15,946.22. The Standard & Poor’s 500 Index was up 14.03 points, or 0.78 per cent, at 1,813.87. The Nasdaq Composite Index was up 28.66 points, or 0.69 per cent, at 4,176.84.