* Dollar drifts higher, no surprises from Bernanke’s testimony
* Fed expects to trim bond buys but not on preset course
* Sterling outperforms after BOE minutes
By Ian Chua
SYDNEY, July 18 (Reuters) - 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 this year.
“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 comments.
That saw the dollar index, which tracks the greenback’s performance against a currency basket, climb off a three-week trough.
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 Australian currency.
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.