November 20, 2013 / 3:00 PM / 4 years ago

FOREX-Dollar weakens as comments from Fed's Bernanke weigh

4 Min Read

* Bernanke says rates may stay near zero for a time after bond-buys end

* Euro falls vs yen after hitting four-year high, down vs dollar

* U.S. data shows unexpected fall in October inflation

By Gertrude Chavez-Dreyfuss

NEW YORK, Nov 20 (Reuters) - The dollar drifted lower on Wednesday after Federal Reserve Chairman Ben Bernanke said the U.S. central bank would maintain its ultra-easy monetary policy for as long as needed.

Bernanke said late on Tuesday officials wanted evidence of durable job growth before scaling back the Fed's bond-buying stimulus, adding that interest rates were likely to remain near zero for a considerable time after the asset purchases end.

A mixed set of U.S. economic data provided no clue as to when the Fed will eventually reduce its asset purchases, with benign consumer prices largely offsetting the faster-than-expected rise in retail sales.

"The inflation data affirms the Fed's easy policy stance," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

The dollar fell 0.2 percent against the yen to 99.90, having risen for much of the past month on expectations that the United States would begin to wind down its stimulus. The dollar index was also down 0.2 percent at 80.565.

The rise in U.S. retail spending failed to ignite the dollar, with U.S. inflation falling unexpectedly in October.

In a speech that echoed dovish comments by his nominated successor, Janet Yellen, Bernanke said while the economy had made significant progress, it was still far from where officials wanted it to be.

Investors will later scour the minutes of the Federal Open Market Committee's October meeting for clues about how soon policymakers may be prepared to scale back monetary easing.

The FOMC next meets on Dec. 17 and 18.

"There might be a few jitters going into the December FOMC, whether they start to taper or ... cut the (unemployment) threshold," said Paul Robson, currency strategist at RBS. "That might keep the dollar on the back foot."

The dollar was flat against the euro, which was last $1.3538. The euro was down 0.2 percent versus the yen at 135.20 . It earlier hit a four-year high of 135.95 yen in Asian trade.

Ulrich Leuchtmann, head of FX research at Commerzbank in Germany, said the euro had been recovering from an unjustified sell-off since the cut in euro zone interest rates earlier this month, but that rally had now played out.

"From a fundamental perspective it makes sense for there to be a (rebound in the euro)," he said. "(But) the justified correction has run out of steam."

Around one-quarter of European Central Bank council members, led by Bundesbank chief Jens Weidmann, spoke out against the rate cut this month, and those divisions were highlighted on Wednesday when Weidmann said the ECB should not signal any further easing of its monetary policy for now.

Data on Wednesday showed Japan logged a trade deficit of 1.09 trillion yen ($11 billion) in October, a record for the month and above a median forecast of 813.5 billion yen, even as exports rose by their largest amount annually in three years.

"The trade data was a little bit soft," said RBS's Robson. "That suggests Japanese authorities will have to do more on the currency."

Analysts said the low-yielding yen was still the preferred funding currency for carry trades, with the Bank of Japan expected to maintain its ultra-loose monetary policy when it meets on Thursday.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below