* Dollar index holds steady above last week's low
* Fed tapering hopes support greenback
* But dollar bulls cautious ahead of Bernanke's testimony
* Aussie up as market pares rate cut bets after RBA minutes
By Masayuki Kitano and Hideyuki Sano
SINGAPORE/TOKYO, July 16 The dollar held steady
versus a basket of currencies on Tuesday, supported by the view
that the U.S. Federal Reserve is 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 halt 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 83.024, little changed from
late U.S. levels but staying above last week's low of 82.418 on
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 an imminent reduction
in stimulus by the Fed.
The dollar eased 0.1 percent against the yen to about 99.76
yen, staying above last week's low of 98.20 yen. An
immediate resistance level is seen at 101.54 yen, its July 8
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.
"I feel markets expect no less than a resounding endorsement
for PM Abe to carry out his policies further without any
hindrance to get Japan out of the deflationary spiral," said a
trader for a Japanese bank in Singapore.
The trader said he thought the dollar would eventually head
higher towards 105.00 yen, but added that such a move was
unlikely to occur in the near term.
The euro edged up 0.1 percent to $1.3072.
Elsewhere, the Australian dollar bounced as market players
trimmed back bets on further interest rate cuts following
comments from the central bank.
The Aussie rose after the Reserve Bank of Australia said in
the minutes of its July meeting that the current policy stance
was appropriate for the timing.
Markets interpreted the minutes as showing less urgency to
cut interest rates than some had anticipated. Swap rates shaved
the probability of a rate cut in August to 53 percent, from 63
The RBA minutes implied a less dovish outlook and gave a
lift to the Aussie dollar, said Jeffrey Halley, FX trader for
Saxo Capital Markets in Singapore.
"Combined with a lot of stop losses between $0.9130 to
$0.9170, we saw a sharp jump," Halley said, adding that there
were more stop-loss bids for the Australian dollar on the
The Australian dollar last stood at $0.9160 for a
gain of 0.6 percent on the day. It rose to as high as $0.9173,
pulling away from Friday's three-year low of $0.8998.