Reuters: US Dollar Report: FOREX-Dollar slips as some trim bets before Bernanke testimony

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FOREX-Dollar slips as some trim bets before Bernanke testimony May 22nd 2013, 08:46 Wed May 22, 2013 4:46am EDT * Dollar index down 0.1 percent * BOJ upgrades economic assessment, stands pat as expected * Euro hits 3-1/2 yr high versus yen By Anirban Nag LONDON, May 22 (Reuters) - The dollar shed some of its lofty gains against a basket of currencies on Wednesday, as investors trimmed favourable bets before testimony from the U.S. Federal Reserve chief. Ben Bernanke will deliver his testimony to Congress at 1400 GMT and is expected to strike a somewhat optimistic view of the economy. But with inflation subdued, he is likely to reiterate the Fed's ultra-loose monetary policy will stay, analysts said. That would temper speculation that a recent improvement in the U.S. labour market will drive the Fed to begin unwinding its bond-buying programme later this year. This could see the dollar ease, but any dips are likely to be shallow, given U.S. growth is faster than that in most developed countries. Minutes from the last Federal Open Market Committee meeting, due at 1800 GMT, will highlight the debate on whether the Fed will scale back its asset purchases and are likely to support the dollar. The dollar index was down 0.13 percent at 83.757, slipping from a near three-year high of 84.371 struck last week. The index has risen nearly 5 percent this year as speculators and long-term investors added to bets in favour of the dollar. "Bernanke is likely to reiterate his dovish view that it is too early to withdraw monetary stimulus," said Marcus Hettinger, currency strategist at Credit Suisse. "Given the market is tactically long dollar, Bernanke's comments could see the dollar ease somewhat. But the Fed minutes are likely to be hawkish, so we expect the dollar to regain ground, especially against the yen." The dollar's dip pushed the euro higher, with the single currency trading 0.2 percent higher at $1.2935. BOJ STEADY The Bank of Japan kept policy steady, as widely expected, and upgraded its assessment of the economy. Governor Haruhiko Kuroda did not expect long-term rates to spike given the scale of the BOJ easing and reiterated that there was no change in the goal of achieving 2 percent inflation. The dollar was up 0.4 percent at 102.96 yen, having hit a 4-1/2 year high of 103.32 yen on Friday. The euro hit a 3-1/2 year high of 133.14 yen, up 16 percent on the year. Traders said the yen was likely to come under more pressure once outflows from Japanese investors seeking higher yields gather pace. U.S. 10-year yields, for example, hit a two-month high of 1.998 percent on Tuesday before slipping on comments from Fed officials James Bullard and William Dudley. "Given words from other Fed members ahead of Bernanke's testimony, we're not expecting Bernanke to signal taking a step back from bond-buying anytime soon, so that could be a short-term negative for the dollar," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York. Link this Share this Digg this Email Reprints

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