Tuesday, 1 Mar 2011

US Dollar Declines after Bernanke Speech

The U.S. dollar fell to a 3-1/2-month low against a basket of other major currencies on Tuesday and could fall further after Federal Reserve chief Ben Bernanke offered no hint that the U.S. central bank was considering tightening its loose monetary policy.

After briefly dipping below $1.38, the euro rebounded and remained on track to test key resistance around $1.3862, the 2011 peak. Analysts expect the euro to stay supported ahead of Thursday's European Central Bank policy meeting, at which the ECB may signal a willingness to hike rates.

In testimony before Congress, Bernanke said downside risks to growth had diminished and said for the first time that the risk of deflation was now "negligible." But he said job growth remains far too anemic and provided no clue whether the Fed was considering cutting short its $600 billion bond-buying program designed to stimulate the economy.