Reuters: US Dollar Report: FOREX-Dollar rises vs euro, could stay range-bound

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FOREX-Dollar rises vs euro, could stay range-bound Mar 27th 2012, 15:58 Tue Mar 27, 2012 11:58am EDT * Bernanke comments seen keeping alive chances of QE3 * U.S. consumer confidence declines in March * Euro-zone worries persist ahead of finance ministers' meeting By Luciana Lopez NEW YORK, March 27 (Reuters) - The dollar rebounded against the euro on Tuesday after two sessions of losses, but tepid U.S. data and caution around a meeting of euro-zone finance ministers later in the week kept trading range-bound. The greenback's advance came a day after comments from U.S. Federal Reserve Chairman Ben Bernanke prompted a rally in stocks on hopes the Fed could yet embark on a third round of quantitative easing. On Monday, Bernanke said "further significant improvements in the unemployment rate will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies." He made those comments to the National Association for Business Economics. Until markets have more clarity on the Fed's plans, though, trading could stay constrained, analysts said. "From our perspective, people are misinterpreting the Bernanke speech," said Mark McCormick, a G10 currency strategist with Brown Brothers Harriman in New York. "I think people have taken it as sign of quantitative easing coming down the line, but I think that exaggerates the key takeaway," he added, with Bernanke not necessarily signaling more QE. On Tuesday, U.S. data did little to clarify views on the health of the world's biggest economy. Single-family home prices were unchanged in January, suggesting the battered housing market is still crawling along the bottom, while an index of U.S. consumer confidence slipped in March. The U.S. dollar index, which measures the dollar's performance against a basket of major currencies, was up just 0.1 percent at 79.059. Analysts sounded a cautionary note, however, saying the dollar could suffer further short-term declines against major currencies if speculation over a third bout of quantitative easing persisted, but any data pointing to a pick-up in U.S. economic activity could see the currency claw back losses. "The economy is doing a lot better than many people thought and the market is going to run with that, but the Fed will not stand around while U.S. yields back up significantly," said Neil Mellor, currency strategist at Bank of New York Mellon. "There will be a cat-and-mouse game between the market and Bernanke. I think the dollar will be in a range for some time." The euro zone's sovereign debt crisis could still weigh on the single currency, as well. While Germany signaled for the first time on Monday its willingness to increase the resources available for tackling the euro-zone debt crisis, several key events remain this week. Those include a meeting of euro-zone finance ministers in Copenhagen on Friday and Saturday and Spain's budget presentation on Friday. The meeting of finance ministers "could result in some near- term volatility," said Omer Esiner, chief market analyst with Commonwealth Foreign Exchange in Washington, D.C. "It's hard to push the euro up further from these levels without some catalyst." The euro slid 0.17 percent to $1.3334 on Tuesday. But against Japan's yen, the single currency rose 0.14 percent to 110.79 yen. YEN STEADIES AFTER DROP Traders and analysts said moves in U.S. Treasuries would be key for the dollar. If demand for Treasuries gained steam and bond yields fell in the wake of Bernanke's comments, the dollar could face more pressure. The greenback was up 0.48 percent against the yen at 83.16 yen, below a recent 11-month high of 84.19 yen. The Japanese currency was seen as vulnerable to more selling, and has been under heavy pressure since Japan announced monetary easing measures last month. With the fiscal year ending on March 31, which is Saturday, expected repatriation flows have done little to support the yen so far, said Joe Manimbo, a market analyst with Western Union Business Solutions in Washington, D.C. "That suggests next week the yen could come under pressure, since it didn't benefit from expected month- and year-end flows," he added. Link this Share this Digg this Email Reprints

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