Reuters: US Dollar Report: FOREX-Dollar stung by dovish Fed, yen also pressured

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FOREX-Dollar stung by dovish Fed, yen also pressured Mar 27th 2012, 01:18 Mon Mar 26, 2012 9:18pm EDT * Bernanke's comments seen keeping alive QE3 hopes * Dollar struggles, yen also hit as risk appetite improves * Commodity currencies benefit from better sentiment By Ian Chua SYDNEY, March 27 (Reuters) - The dollar held near a near one-month low against a basket of major currencies on Tuesday after Federal Reserve Chairman Ben Bernanke signalled supportive monetary policy would remain and kept alive hopes of more stimulus for the U.S. economy. The dollar index was at 78.925, not far off a low of 78.870 plumbed overnight when Bernanke said the central bank's policy of very low interest rates was needed to reduce unemployment and made it clear he was in no rush to reverse course. "His argument that unemployment was largely cyclical rather than structural caught the market's imagination," said Sebastien Galy, strategist at Societe Generale. "It suggests QE3 is on its way or at least a very dovish stance until such a point as unemployment falls enough," he said, referring to another round of bond buying or quantitative easing. Bernanke's comments coupled with an unexpected rise in German business sentiment gave risk appetite a boost, lifting the euro and weighing on the safe-haven yen. The euro rose as high as $1.3367 from Monday's low of $1.3190, bringing it close to resistance at $1.3372, the 76.4 percent retracement of its late February to mid-March fall. The single currency last stood at $1.3360. Against the yen, the single currency climbed to 110.84 and was within easy reach of a 4-1/2 month high of 111.43 set last week. The dollar edged up to 83.00 yen, pulling further away from Friday's trough of 81.97. But talk of selling interest by Japanese exporters above 83.00 could cap its upside for now. Commodity currencies, hit hard last week by growing fears of a hard economic landing in China, also gained. The Australian dollar popped back above $1.0500, well off last week's low of $1.0333. "As participants cautiously price more QE back into markets, the commodity currencies - the Australian, Canadian, and New Zealand Dollar - are likely to attract attention given their high yields relative to the U.S. dollar," said Christopher Vecchio, currency analyst at DailyFX. There is little in the way of market-moving data in Asia on Tuesday. In Europe, French consumer confidence and German import prices are due later in the day. Link this Share this Digg this Email Reprints

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