* Dollar index off 3-year highs, dlr/yen down 0.6 pct
* Focus on Fed minutes and Bernanke speech due Wednesday
* Aussie pares loss after slipping on China trade data
By Anirban Nag
LONDON, July 10 The dollar fell against the yen
and a basket of currencies on Wednesday, tracking U.S. Treasury
yields before the minutes of the Federal Reserve's June meeting
and a speech by Chairman Ben Bernanke.
But overall, sentiment towards the U.S. currency remained
upbeat with investors likely to resume buying the dollar if the
minutes and Bernanke reiterate that the Fed is preparing the
ground to slow its asset-purchase programme in coming months.
The dollar fell 1 percent to 100.10 yen, pulling away
from a six-week high of 101.54 yen set on Monday on trading
platform EBS. The dollar index was 0.3 percent lower at
84.316, off a three-year high of 84.753 struck on Tuesday.
U.S. 10-year Treasury yields with which the
dollar index has a robust correlation, have slipped from
a recent high of 2.755 percent, spurring some dollar selling and
profit-taking in favourable bets on the greenback.
"There is a risk that Bernanke in his speech could pour cold
water on rising U.S. yields," said Jeremy Stretch, head of
currency strategy at CIBC World Markets. "But any dollar
weakness will be bought into as the U.S. economy has the impetus
to continue recovering."
The dollar's drop gave the euro and sterling
a breather. Both tumbled the previous day, hurt by growing
expectations that central banks in the euro zone and Britain
will have to keep policy loose for a long time.
The euro shrugged off a downgrade to Italy's credit rating
by Standard and Poor's, rising 0.3 percent to $1.2820. It
had hit a three-month low of $1.2755 on Tuesday, after European
Central Bank policymaker Joerg Asmussen said the central bank's
guidance on interest rates staying at a record low extended
beyond 12 months.
The ECB later issued a statement saying Asmussen had not
intended to give any guidance on the exact length of time for
which it expects to keep rates at record lows.
"Notwithstanding these rather noisy intraday fluctuations in
euro/dollar, we need to stress that tensions are showing up in a
number of euro area indicators and maintaining modest downward
pressure on the euro/crosses," said Stephen Gallo, European head
of FX strategy at at BMO Financial Group.
The euro was down 0.8 percent against the yen at
128.30 yen and down 0.1 percent versus the Australian dollar
The Australian dollar bounced after falling earlier on
Wednesday as weak Chinese trade data reinforced expectations of
a slowdown in China, a major export market for Australia.
It rose 0.4 percent to $0.9212, off an intraday low
of $0.9125 hit after the Chinese trade data.