* Dollar falls after Fed chief's comments, but uptrend
* Bernanke says to continue accommodative policy
* 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 central bank may not wind down its asset purchase
programme as soon as previously thought.
Major currencies such as the euro and sterling rose, but
traders and strategists said markets had perhaps over-reacted.
Gains against the dollar would be fleeting, they said, with
market participants looking to buy the U.S. currency at lower
levels as most still expect it to resume its uptrend.
Strategists said U.S. initial jobless claims figures due at
1230 GMT could lead to some volatility in the dollar.
Bernanke said the Fed would continue to pursue an
accommodative monetary policy due to low inflation and weakness
in the labour market. Still, Fed minutes 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 82.943.
"I don't think the extent of the sell-off was justified, so
I think the dollar is going to reclaim those losses relatively
quickly," said Chris Turner, head of FX strategy at ING.
The general market view had been that the Fed could begin to
scale back its massive $85 billion-a-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
The market's immediate focus turned to the initial jobless
claims data due.
"The jobless claims number will be important because
everyone has put such a focus on the U.S. labour markets
including Bernanke himself," said Adam Myers, senior FX
strategist at Credit Agricole, adding that a
larger-than-expected number could push euro/dollar higher.
The euro was last up 0.7 percent against the dollar at
$1.3068, having risen to a three-week high of $1.32085,
rebounding more than 3 percent from Wednesday's low of $1.2765.
ING's Turner said that the sovereign yield spreads between
Germany and the U.S. are consistent with
the euro slipping to $1.28, perhaps even in the next few days.
The single currency has been under pressure as the European
Central Bank last week clearly indicated it would keep interest
rates low for an "extended period". ECB policymaker Jens
Weidmann, however, said on Thursday that the central bank could
hike rates if inflationary pressures re-emerged.
The dollar also fell against the yen, dropping to a two-week
low of 98.20 yen. It was last down 0.4 percent at 99.27
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.