Reuters: US Dollar Report: FOREX-Dollar edges up after Bernanke comments, seen staying firm

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FOREX-Dollar edges up after Bernanke comments, seen staying firm Jul 18th 2013, 04:43 Thu Jul 18, 2013 12:43am EDT * Dollar drifts higher, no surprises from Bernanke's testimony * Fed expects to trim bond buys but not on preset course * Dollar seen staying firm as Fed heads toward QE tapering By Masayuki Kitano and Ian Chua SINGAPORE/SYDNEY, July 18 (Reuters) - The dollar edged higher versus a basket of currencies on Thursday in a choppy session that saw investors first sell then buy back the currency in reaction to comments by 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. Bernanke's remarks did not seem to suggest any major shift in his stance, said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo. He expected the dollar to most likely head higher gradually, due to the divergent monetary policy outlook for the United States and other countries. "But if you ask whether there will be a sudden move higher in the dollar in the near term, I don't see anything that could have that kind of an impact," Maeba said. The dollar index, which tracks the greenback's performance against a currency basket, edged up 0.2 percent to 82.856 , staying above a three-week low of 82.342 set on Wednesday. The euro slipped 0.2 percent to about $1.3096, staying below Wednesday's intraday high near $1.3179. Elsewhere, the Australian dollar fell 0.7 percent to $0.9168 , taking a breather after rallying over the past few days. Some analysts expect the U.S. dollar to continue gaining as the Fed edges closer to tapering its bond purchases of $85 billion a month. "I don't know if it will be September of October, but once the reduction of QE (quantatative easing) starts, U.S. yields will head higher and we may even start to see a clear rise in short-term yields," said Daisuke Karakama, market economist at Mizuho Bank in Tokyo. Later this year, the dollar may test a 4-1/2 year high of 103.74 yen set back in May, although a rise to 104.00 yen seems unlikely, Karakama said. The dollar rose 0.4 percent against the yen to 100.01 . JAPAN ELECTIONS One event risk for the yen is Japan's upper house elections on Sunday. Recent opinion polls keep Prime Minister Shinzo Abe's ruling bloc on track for a big win in the election. That outcome would give Abe more freedom to push forward his agenda to revive the economy through aggressive monetary easing, hefty government spending and structural reforms. While the yen might slip on Monday if Abe's ruling bloc gains a large majority in the upper house as expected, a sustained bout of yen-selling on such an outcome seems unlikely, market players said. Link this Share this Digg this Email Reprints

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