* Bernanke says could scale back bond buys at one of its
next few meetings
* Swiss franc falls, SNB's Jordan did not rule out negative
* BOJ upgrades economic assessment, stands pat as expected
By Wanfeng Zhou
NEW YORK, May 22 The dollar rose to a 4-1/2-year
high against the yen and a near three-year peak against a
currency basket on Wednesday after Federal Reserve Chairman Ben
Bernanke stoked speculation the U.S. central bank could slow its
asset buying in coming months.
Bernanke, in testimony to Congress, said the Fed's massive
bond-buying program would remain in place for now. But he added
if economic improvement continued, the Fed could "in the next
few meetings take a step down" in its purchases and warned that
holding interest rates too low for too long has its risks.
The dollar initially sold off after Bernanke said monetary
stimulus is helping the U.S. economy recover and it was too soon
to remove existing measures. It then rebounded and surged to the
day's highs as traders focused on the possibility of the Fed
reducing its bond buying later this year.
"The takeaway from his speech is clear which is that the Fed
is serious about winding down QE and all of the speculation
surrounding this possibility is validated," said Kathy Lien,
managing director of FX Strategy for BK Asset Management in New
"The U.S. dollar has been on a tear since the beginning of
the month and should extend its gains now that Bernanke
green-lighted the rally."
The dollar has risen more than 5 percent so far this year
against a basket of currencies on expectations the beginning of
the end of the Fed's bond-buying program might come sooner than
But those hopes faded somewhat this week after several Fed
officials dampened speculation the Fed may change its policy
stance any time soon.
The dollar rose to a session peak of 103.73 yen,
according to Reuters data, the highest since October, 2008. It
was last up 0.4 percent on the day at 102.87 yen.
Limiting the dollar's gains, minutes of the latest policy
meeting released Wednesday highlighted an active debate over how
soon the Fed should start to scale back its bond-buying
stimulus, suggesting divisions within policy making committee.
Against a basket of currencies, the dollar index rose
to 84.422, the highest since July 2010. It was last at 84.253,
up 0.5 percent on the day.
The euro slipped 0.4 percent to $1.2854, retreating
from a one-week high of $1.2998 set before Bernanke's speech.
SWISSIE A FOCUS
The euro hit a two-year high against the Swiss franc
of 1.2648 francs after Swiss National Bank chief
Thomas Jordan did not rule out negative interest rates and said
policymakers could adjust the euro/franc currency cap if
necessary. It was last at
1.2566, up 0.4 percent.
The U.S. currency climbed to a nine-month peak against the
Swiss franc of 0.9838 franc, and was last at 0.9773
franc, up 0.8 percent on the day.
UBS said its forecasts for the euro/Swiss franc and the
dollar/Swiss franc are 1.27 and 0.99 in three months' time but
there are upside risks to its targets.
The euro hit a 3-1/2-year high of 133.77 yen,
before pulling back to 132.33 yen, up 0.1 percent on the day. So
far this year, it has gained almost 16 percent.
Traders said the yen was likely to come under more pressure
once outflows gather pace, from Japanese investors seeking
higher yields overseas.
The Bank of Japan kept policy steady on Wednesday and
Governor Haruhiko Kuroda said he did not expect long-term rates
to spike given the scale of the BOJ easing and reiterated that
there was no change in the goal of achieving 2 percent
Sterling fell to a two-month low against the dollar
after an unexpectedly sharp drop in retail sales sparked
concerns the Bank of England could opt for more monetary easing
in the coming months.
The Australian dollar fell to a near one-year low of $0.9659
and was last down 1.1 percent at $0.9695.