* Dollar supported on risk aversion, Bernanke awaited
* Weak U.S. consumer confidence weighs on higher-risk FX
* Analysts: Dollar may fall on Bernanke testimony
(Adds detail, comment, updates throughout; previous TOKYO)
By Naomi Tajitsu
LONDON, Feb 24 (BestGrowthStock) – The dollar held broad gains
on Wednesday after weak U.S. consumer confidence data the
previous day stung risk appetite, and as investors braced for
testimony from Federal Reserve Chairman Ben Bernanke.
Higher-yielding currencies, including the Australian dollar,
slipped to the day’s low in European trade after Asian shares
fell and European stocks dipped in early trade.
The euro hovered near a nine-month low versus the dollar,
smarting from weak German business sentiment data released on
Tuesday, while concerns about Greece’s public finances also kept
the single European currency vulnerable to more losses.
Analysts said they expected subdued trade before Bernanke
begins two days of Congressional testimony at 1500 GMT.
Investors will scrutinise his comments for clues to the
Fed’s interest rate outlook after the U.S. central bank last
week raised the rate at which it offers emergency loans to
banks, a move it insisted was technical.
“It’s still a risk-averse situation. Stocks were down in
Asia, and the yen and the dollar were higher after the consumer
confidence figures disappointed the market,” said Johan Javeus,
chief currency strategist at SEB in Stockholm.
“There’s also some nervousness about what Bernanke is going
to say today,” he said, adding that the Fed needed to make clear
to the market that last week’s raising of the discount rate
should not be interpreted as a monetary tightening move.
Bernanke’s testimony follows a speech by St. Louis Fed
President James Bullard, who on Tuesday said that if the U.S.
economy performed as expected, rates were probably on hold into
2011. [ID:nNAT007288]
Bullard also said the Fed would like to try out the 50 basis
point spread between the discount rate and the Fed funds rate –
which is at essentially zero.
He added he was happy to interpret the Fed’s use of
“extended period” in its policy statements on U.S. interest
rates to mean that rates would stay low for six months.
“We would expect (Bernanke) to reiterate and echo recent
comments from Bullard that last week’s hike in the discount rate
hike was not akin to policy tightening, and that hikes in the
fed funds is still a long way away,” RBC analysts said in a
note.
“If so, we would expect this to weigh on (the dollar), lift
stocks and reverse the sharp moves seen through yesterday.”
By 0926 GMT, the dollar up a touch on the day against a
currency basket at 80.884 (.DXY: ), not far from an eight-month
high of 81.342 hit late last week.
The euro (EUR=: ) was up 0.1 percent to $1.3515. Gains were
capped after European shares (.FTEU3: ) fell 0.5 percent,
reversing early gains.
In addition, Tuesday’s unexpectedly weak reading of the
German Ifo index of business sentiment, which reminded the
market the euro zone economy is struggling.
The Australian dollar (AUD=D4: ), often considered a high-risk
currency, fell 0.4 percent against the U.S. dollar to a session
low of $0.8857, having retreated from a one-month high of
$0.9072 hit on Wednesday.
It also slipped against the yen, which held gains after
rallying across the board on Tuesday on perceived safe-haven
demand. The dollar (JPY=: ) slipped 0.1 percent to 90.06 yen,
further retreating from climb above 92 yen last week.
Stock Market Research Tools
(Editing by Nigel Stephenson)
FOREX-Dollar supported, investors brace for Bernanke
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