Dollar Weakens Against Rivals On Bernanke Testimony
By Riva Froymovich, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- The dollar dipped versus the euro and yen Tuesday on the release of Federal Reserve Chairman Ben Bernanke’s testimony to the U.S. Senate Banking Committee.
The testimony pushed the euro above $1.6000, but it soon retreated to its previous levels. Overnight, the common currency struck a fresh all-time high of $1.6040.
The dollar also fell to a fresh more than one-month low of Y104.16 after Bernanke’s remarks were published.
Bernanke acknowledged that the declining U.S. dollar has “contributed somewhat” to higher oil prices but said other forces – primarily global supply and demand – are the “principal drivers.”
He noted uncertainty in the U.S. inflation outlook, but warned the U.S. economy faces “numerous difficulties,” suggesting those risks remain his top priority despite a significant upward revision to the Fed’s 2008 growth forecast.
Bernanke’s remarks Tuesday support the idea that the target fed funds rate for overnight lending will stay at 2% for many months. The Fed cut the fed funds rate by 3.25 percentage points between September and April. That reality has undercut hopes for a dollar rebound against the euro.
Recently, Tuesday morning in New York, the euro was at $1.5994 from $1.5910 late Monday. The dollar was at Y104.32 from Y106.13, while the euro was at Y166.84 from Y168.86, according to EBS. The U.K. pound was at $2.0100 from $ 1.9945, and the dollar was at CHF1.0032 from CHF1.0165 late Monday.
-By Riva Froymovich, Dow Jones Newswires; 201 938-5063; riva.froymovich@ dowjones.com
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(Updates with fresh prices and analyst comments)
By Riva Froymovich
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- The dollar is mostly stable versus the euro after it declined immediately following the release of Federal Reserve Chairman Ben Bernanke’s testimony to the U.S. Senate Banking Committee.
The euro is back below $1.6000, but currencies are volatile and risk aversion is high.
Overnight, the common currency reached an all-time high of $1.6040.
Barring regional bank share prices plummeting further, Alan Ruskin, head of international currency at RBS Greenwich Capital, said he doesn’t expect the euro to reach another high Tuesday.
However, there is “no end to dollar negative sentiment and the inclination to sell any dollar upticks, notably against the most obvious ‘flight to quality’ plays, the Swiss franc and yen,” he said.
Meanwhile, the dollar continues to near a fresh six-week low against the yen as U.S. stocks stay weak. The dollar earlier fell to Y104.16.
Tuesday morning in New York, the euro was at $1.5980 from $1.5910 late Monday. The dollar was at Y104.23 from Y106.13, while the euro was at Y166.52 from Y168.86, according to EBS. The U.K. pound was at $2.0066 from $1.9945, and the dollar was at CHF1.0036 from CHF1.0165 late Monday.
Bernanke acknowledged that the declining U.S. dollar has “contributed somewhat” to higher oil prices, but said other forces – primarily global supply and demand – are the “principal drivers.”
He noted uncertainty in the U.S. inflation outlook and expressed concerns over growth, suggesting risks to growth remain his top priority despite a significant upward revision to the Fed’s 2008 growth forecast.
“By highlighting the significant downside risks to growth, as opposed to believing at the end of last month that those risks had diminished somewhat, the Federal Reserve chairman sounds a bit more dovish than the FOMC statement of a couple of weeks ago,” said Marc Chandler, global head of foreign exchange at Brown Brothers Harriman in New York.
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