* Dollar firm on Fed tapering hopes
* Bulls cautious ahead of Bernanke's testimony
* Weaker-than-expected U.S. retail sales dent dollar's
By Hideyuki Sano
TOKYO, July 16 The dollar held on to a moderate
recovery path on Tuesday, with investors sticking to the view
that the Federal Reserve is still likely to be the first among
major central banks to move away from ultra-loose monetary
Many traders were cautious about being too long in the
dollar ahead of testimony on Wednesday by Fed Chairman Ben
Bernanke, whose surprisingly dovish tone last week caused panic
selling in the U.S. currency.
Many market players think Wednesday's testimony is unlikely
to change expectations that the Fed will start reducing its bond
buying later this year and scrap it completely by mid-2014.
"The testimony is a venue to explain the Fed board's
thinking, rather than Bernanke's own ideas. So I would expect
his remarks to be a bit more hawkish than last week," said
Minori Uchida, chief currency analyst at the Bank of
The dollar index stood at 83.03 in early Asian
trade, little changed from late U.S. levels but maintaining its
rebound from a low of 82.418 set on Thursday.
The index rose as high as 83.46 on Monday but its gains were
trimmed after data showed U.S. retail sales rose less than
expected in June, denting expectations of a reduction in
stimulus by the Fed.
The dollar traded at 99.91 yen against the yen,
holding on to gains in the past two sessions from last week's
low of 98.20 yen. An immediate resistance level is seen at
101.54 yen, its July 8 peak.
The yen could face more pressure towards the weekend on
expectations that Japan's upper house election on Sunday will
hand Prime Minister Shinzo Abe a big victory, giving him more
freedom to push forward with his agenda to revive the economy
through monetary easing.
The euro was flat in early Asian trade and stood at $1.3054
, having been wobbling since it had peaked near $1.32 just
after Bernanke's comments last week.
The common currency was also undermined by a slide in German
exports as well as Portugal's political wrangling over austerity
The Australian dollar rose a tad after emerging market
currencies, such as Brazil's real, posted big gains on Monday
after data showed the economic slowdown in China was not as bad
as some had feared.
The Aussie was up 0.2 percent at $0.9127, pulling
away from Friday's three-year low of $0.8998.