* Dollar falls after Fed chief's comments, but uptrend
* Bernanke says to continue accommodative policy
* FOMC minutes also suggest stimulus may not be reduced in a
* BOJ holds rates, sounds optimistic on economy
By Anooja Debnath
LONDON, July 11 The dollar slid on Thursday
after comments from Federal Reserve Chairman Ben Bernanke
indicated the U.S. central bank may not wind down its asset
purchase programme as soon as previously expected.
Major currencies like the euro, sterling and Australian
dollar all rose, although traders and strategists said markets
had perhaps over-reacted and gains against the dollar would be
fleeting. They said they were looking to sell into these rallies
as they expect the U.S. currency to resume its uptrend.
Bernanke said the Fed would continue to pursue an
accommodative monetary policy as inflation remained low and the
unemployment rate might be understating the weakness of the
labour market. Fed minutes, however, showed that half of the
bank's policymakers think the stimulus programme should stop by
the end of this year.
The dollar slipped against a basket of currencies, with its
index, falling to 82.418, its lowest since June 25
and down around 2.8 percent from the three-year high of 84.753,
touched just two sessions ago. It last stood at 83.005.
The general market view had been that the Fed could begin to
scale back its massive $85 billion-per-month stimulus programme
by September and perhaps halt it by the end of the year but
markets were less sure about those timeframes after the Fed
minutes and Bernanke's comments on Wednesday.
Analysts, however, said in the longer term the dollar would
strengthen as the Fed's stance of reducing stimulus stands in
contrast to other major central banks which look set to remain
accommodative, they said.
"There has been an over-reaction in the FX markets as they
were so incredibly long dollars heading into the FOMC minutes
yesterday," said Adam Myers, senior FX strategist at Credit
Agricole. "I still think the dollar's uptrend is intact but the
pace will slow given Bernanke's comments."
The dollar index has shared a close correlation with U.S.
treasury yields, which touched a low of 2.5568
percent, retreating from Monday's peak of 2.755 percent, which
was its highest since August 2011. It was last at 2.5888
The euro rose to a three-week high of $1.32085 at one
stage, up more than 3 percent from Wednesday's low of $1.2765.
It was last up 0.6 percent at $1.3045.
The dollar also fell against the yen, dropping to a two-week
low of 98.20 yen. It was last down 0.6 percent at 99.11
yen. Chartists said a weekly close above 98.75 yen would be a
signal that the dollar is retaining its upward bias.
The dollar extended losses after the Bank of Japan kept its
policy on hold and had its most upbeat assessment in
two-and-half years. But analysts said the fall in the pair was
likely to be short-lived.
"While we expect the dollar/yen correction lower to extend
further near term, likely targeting the 95.00/94.00 yen area, we
would view this as a longer-term buying opportunity," analysts
at Morgan Stanley said in a note.