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Wednesday, February 24th, 2010 | Posted by Best Growth Stock

FOREX-Dollar supported, investors brace for Bernanke

* 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 (Reuters) - 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: Quote, Profile, Research), not far from an eight-month high of 81.342 hit late last week. The euro (EUR=: Quote, Profile, Research) was up 0.1 percent to $1.3515. Gains were capped after European shares (.FTEU3: Quote, Profile, Research) 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: Quote, Profile, Research), 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=: Quote, Profile, Research) 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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