FOREX-Dollar under pressure as market seeks Fed policy clues

* Dollar weak before Bernanke speech, inflation data

* Dollar index may test trendline near 76.00, then 2009 low

* 76.4 pct retrace of euro’s 2009-2010 drop lies at $1.4374

(Updates prices, adds quote)

By Jessica Mortimer

LONDON, Oct 15 (BestGrowthStock) – The dollar hovered near a
10-month low versus a currency basket on Friday as investors
seeking more clues on likely U.S. monetary easing waited for
Federal Reserve head Ben Bernanke to speak.

Bernanke’s speech at 1215 GMT is expected to give pointers
on how aggressive the Federal Reserve’s anticipated easing will
be next month, while soft inflation data at 1230 GMT could add
to the case for looser policy. [ID:nN14141178] (ECONUS: )

The euro was just short of its highest level in more than
eight months against the greenback, while the Australian dollar
(AUD=D4: ) hovered close to a 28-year peak, with traders reporting
euro buying by Asian central banks and real money accounts.

“There is growing expectation that he (Bernanke) may provide
more clarity on the Fed’s proposed QE2 today … The criteria
for perceived success is important to provide a guide as to when
it may end,” a London-based trader said.

“The dollar is likely to continue to weaken if the market
feels that the Fed will just keep going”.

At 1003 GMT, the dollar index (Read more about the global trade. ) was down 0.3 percent at
76.442, near a 10-month low of 76.259 hit the previous day. It
has support at about 76.00, roughly where a trendline from lows
in July 2008 and November 2009 now lies. If it breaks that, the
next target is the November low at 74.17.

The dollar reversed a brief recovery during Asian trade when
investors trimmed short positions.

The euro edged up 0.1 percent to $1.4093 (EUR=: ), having hit
a high for the day of $1.4113, just shy of an eight-month peak
of $1.4123 hit on Thursday.

Upside targets for the euro include a late January high at
$1.4195 and then $1.4374, the 76.4 percent retracement of the
euro’s slide from its November 2009 peak down to a trough hit in

“Bernanke should give some indication of the shape and size
of the stimulus. If either that or the inflation numbers
disappoint then the dollar will definitely go lower,” said
Ankita Dudani, currency strategist at RBS.
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Analysts said a sustained dollar rebound seems unlikely at
this point.

“I think that might be pretty hard, at least until the
FOMC,” said Koji Fukaya, chief currency strategist at Credit
Suisse Securities in Tokyo, referring to the Fed’s policy
meeting in November.

In contrast to the Fed’s hints at QE, the European Central
Bank has stood firm on plans for an exit from extraordinarily
loose monetary policy. Data on Tuesday showed more expensive
fuel boosted euro zone inflation in September, though core
inflation stayed subdued. [ID:nBRLFLE67B]

The Australian dollar was up 0.1 percent at $0.9954, having
hit a 28-year peak just short of parity at $0.9994 on Thursday.

The U.S. Treasury Department is also expected to issue a
report on the currency practices of other countries on Friday.
The U.S. administration faces a tough call on whether to label
China a currency manipulator, a move that could throw a wrench
into Sino-U.S. relations. [ID:nN14134313]

The dollar dipped 0.3 percent to 81.20 yen (JPY=: ). It hit a
15-year low of 80.88 yen on Thursday, only about 1 yen above its
record low of 79.75 yen set in April 1995, keeping the market
nervous about the possibility of more Japanese intervention to
curb yen strength.

Japanese Finance Minister Yoshihiko Noda said on Friday
Japan would continue to take decisive steps on currencies
regardless of Group of Seven or G20 meetings. [ID:nTOE69E00B]
(Additional reporting by Masayuki Kitano in Tokyo; Editing by
Hugh Lawson)

FOREX-Dollar under pressure as market seeks Fed policy clues