* Dollar drifts higher, no surprises from Bernanke's
* Fed expects to trim bond buys but not on preset course
* Sterling outperforms after BOE minutes
By Ian Chua
SYDNEY, July 18 The dollar held on to modest
overnight gains early in Asia on Thursday after a choppy session
that saw investors first sell then buy back the currency in
reaction to comments from Federal Reserve Chairman Ben Bernanke.
In the end, markets were soothed by his pledge to keep
policy accommodative for the foreseeable future. Bernanke still
left intact the prospect of the Fed scaling back stimulus later
"There is something in these comments for everybody," said
Omer Esiner, chief market analyst at Commonwealth Foreign
Exchange in Washington. "Bernanke has done a good job of leaving
himself plenty of manoeuvre room in terms of policy."
Indeed, the dollar recovered early losses even as Treasury
yields dipped and Wall Street rose in reaction to Bernanke's
That saw the dollar index, which tracks the
greenback's performance against a currency basket, climb off a
The euro slipped to $1.3115 from Wednesday's high
around $1.3179, while the dollar edged up to 99.66 yen
from lows near 99.00.
Bernanke's remarks came as the Fed's Beige Book report of
anecdotal information on business activity showed the U.S.
economy continued to grow at a modest to moderate pace in June
and early July.
Some analysts expect the dollar to continue gaining traction
as the Fed edges closer to tapering stimulus.
"As Chairman Bernanke lays out a more detailed exit
strategy, the bullish sentiment surrounding the reserve currency
should gather pace over the near- to medium-term," said David
Song, an analyst at DailyFX.
"But the dollar may face a larger correction in the days
ahead as market participants weigh the outlook for monetary
policy," he said.
Bernanke will testify before the Senate Banking Committee
later on Thursday, but is likely to stick to the theme laid out
before the House Financial Services Committee.
The dollar's modest bounce underperformed sterling and the
The British pound jumped 0.5 percent to a two-week high of
$1.5270 after minutes of the Bank of England's July
meeting showed all nine policymakers voted against more stimulus
for the economy.
The Australian dollar also extended recent gains, reaching
$0.9292 after minutes of the Reserve Bank of Australia
published on Tuesday led markets to pare expectations of further
interest rate cuts.
The Aussie last stood at $0.9229, well off a 34-month trough
of $0.8998 plumbed last Friday.
With Bernanke's testimony out of the way, dealers expect the
major currencies to be largely stuck in a range as the northern
hemisphere summer lull takes effect.
No major economic news out of Asia is expected on Thursday.
In Europe, UK retail sales for June are due, followed by the
weekly U.S. initial jobless claims and a report on factory
activity in the U.S. mid-Atlantic region.