FOREX-Dlr falls vs yen on Bernanke; data buoys euro

* Dollar/yen falls as risk appetite wanes following Bernanke

* Euro/dlr higher, buoyed by above-forecast euro zone data

* Focus on European bank stress tests results

(Adds quotes, details; updates prices)

By Jessica Mortimer

LONDON, July 22 (BestGrowthStock) – The dollar fell close to a
seven-month low against the yen on Thursday on downbeat comments
from Federal Reserve Chairman Ben Bernanke, while better-than-
forecast euro zone data buoyed the euro.

Bernanke said the U.S. economic outlook was “unusually
uncertain” and that the Fed was ready to ease monetary policy
further if necessary, sending the two-year U.S. Treasury yield
to a record low and diminishing the allure of the dollar versus
the yen. [ID:nN21165172] [US/]

The dollar also fell versus the euro, with traders citing
earlier buying of the single currency by east European accounts
and a western European corporate, while data showing a jump in
euro zone manufacturing and services activity and in industrial
output lifted sentiment. [ID:nSLALIE68S] [ID:nBRQ009921]

Attention focused on the release of European bank stress
test results, due at 1600 GMT on Friday although some sources
said they may be released earlier. [ID:nWEA0704]

The euro has had a good run against the dollar in
anticipation of the test results, rising to a 10-week high above
$1.30 on Tuesday as, traders bet most of the 91 European banks
being examined would pass. [ID:nLDE66K0YO]

Some in the foreign exchange market (Read more about international currency trading. ) say the test results
could be positive for the euro if they reveal no unpleasant
surprises, but doubts linger over whether the checks are tough
or transparent enough.

“The market has certainly bought the rumour going into this
week that the stress tests will be positive and people have been
going long euro/dollar, with weak U.S. economic data making it
look like a no-lose situation,” said Lauren Rosborough, currency
strategist at Westpac.

She said the euro was likely to see a short-lived rally
after the results, which could turn to selling next week as
market participants concluded after the tests that the problems
facing euro zone peripheral countries have not gone away.

At 0943 GMT, the euro was up 0.5 percent at $1.2824 (EUR=: ),
well above an earlier session low of $1.2739, though traders
said it ran into offers around the $1.2850 area, keeping it
below the previous day’s highs above $1.29.

Against the yen (EURJPY=R: ), the euro recovered from earlier
falls, trading up 0.1 percent at 111.16 yen, having earlier hit
a two-week low around 110.03.

DOLLAR FALLS VS YEN

The dollar was down 0.4 percent at 86.72 yen (JPY=: ),
extending losses after a 0.5 percent fall on Wednesday, on a
mixture of Japanese exporter offers and hedging selling related
to some currency-linked structured notes.

Traders said the dollar could fall fast if it broke below a
seven-month trough of 86.27 yen hit last week, with stop-loss
dollar offers believed to be waiting below that level.

However, Yuki Sakasai, a forex strategist at Barclays
Capital in Tokyo, said it was unlikely to fall much below the
seven-month low for now.

“What Bernanke has said is essentially the same as the
minutes (of the Fed’s June 22-23 meeting). So his comments alone
are unlikely to push the dollar/yen below recent trading
ranges,” Sakasai said.

The rise in the yen, which gained steeply on the crosses on
Wednesday, has been hampered by caution that Japanese
policymakers may try to talk it down as it nears a 14-year high
around 85 yen per dollar hit last November.

Deputy Finance Minister Motohisa Ikeda said on Thursday
Japan wants to avoid excessive rises in the yen, but market
reaction was muted. [ID:nTOE66L012]

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(Additional reporting by Hideyuki Sano in Tokyo)

FOREX-Dlr falls vs yen on Bernanke; data buoys euro