NEW YORK (Reuters) - The dollar rose against the yen and the Swiss franc on Friday after U.S. Federal Reserve Chairman Ben Bernanke said the Fed was prepared to provide stimulus to boost a U.S. economic recovery that had slowed more than expected, but did not say how or when.
Analysts said the dollar would remain supported because Bernanke gave no firm commitment the central bank would provide additional easing, which could put downward pressure on interest rates.
The Fed also did not make clear what would prompt such measures, they noted.
“Net-net, all Bernanke said was expected. He didn’t change his position and stopped short of committing to another round of quantitative easing,” said Boris Schlossberg, a director of currency research at GFT Forex, in New York. “The major currencies will remain within the trading patterns they had established before his remarks: the yen is weakening and the dollar is somewhat supported against the euro.”
In late afternoon trading in New York, the dollar was up 1.1 percent against the yen at 85.35 yen after climbing as high as 85.49 yen, while the euro see-sawed but last traded up 0.1 percent at $1.2733.
The dollar hit a session high earlier against the Swiss franc at 1.0300 francs and last traded up 0.6 percent at 1.0295 francs.
The dollar got a lift earlier in the session after the government released its revision for second-quarter U.S. GDP growth, with figures that were slightly better than market expectations.
The GDP report helped push benchmark Treasury yields higher, boosting the return on U.S.-denominated assets. Government debt prices extended their earlier losses on Bernanke’s comments.
The Fed announced plans earlier this month to boost the flagging economy by reinvesting money from maturing mortgage bonds in government debt.
Meanwhile, a media report that Prime Minister Naoto Kan was to hold a news conference sparked profit-taking in dollar/yen short positions, traders said.
Kan said he would take firm action on currencies when needed and that he would meet Bank of Japan Governor Masaaki Shirakawa when the central bank chief returns from the U.S. [ID:nTKZ006504] Shirakawa traveled to Jackson Hole, Wyoming, for the Fed conference and will return to Tokyo on August 30. [ID:nTKV006403].
Analysts and traders said Kan seemed to play down the prospect of imminent action but they remained wary with the currency so close to 15-year highs versus the dollar, with the rapidity of any move in the yen seen as key.
“I don’t think we’ll see intervention around current levels unless we get a disorderly move where dollar/yen falls sharply, say by three yen, during one day,” said Gavin Friend, currency strategist at nabCapital in London.
A report from the Nikkei business daily that The Bank of Japan is considering holding an emergency policy meeting early next week to discuss additional monetary easing had little impact on trading. The BOJ’s policy board was scheduled to hold a regular two-day meeting starting on September 6, the paper said.
Despite the risk of possible action by Japanese authorities to curb yen strength, such as yen-selling intervention or monetary easing by the Bank of Japan, some traders and investors say the yen could still test a record high of 79.75 yen to the dollar, hit in April 1995.
Non-commercial speculators cut short positions by 759 contracts to 12,017 contracts and increased long positions by 341 contracts to 63,086 contracts in the week ended August 24, according to data from the U.S. Commodity Futures Trading Commission commitments of traders report released on August 27.
A buy signal on the dollar against the yen was triggered on Friday when the 12- and 26-day moving average convergence divergence line rose above the nine-day signal line. The MACD was last at -0.68, with the signal line at -0.71.
The MACD is used in technical analysis as an indicator of short-term momentum by focusing on exponential moving averages and closing prices.
Additional reporting by Neal Armstrong in London and Vivianne Rodrigues in New York; Editing by Eric Walsh
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