Dollar Levels Off As Bernanke Signals Further Support
The dollar gave back some of its strong recent gains versus the euro on Thursday, falling from an 8-month peak after stocks rebounded on comments from Federal Reserve Chairman Ben Bernanke.
Risk aversion has boosted the dollar in recent weeks, but traders breathed a sigh of relief after Bernanke said that a new lending program from the Fed could backstop the U.S. banking system if the European sovereign debt crisis intensifies.
The Fed stands ready to support the fragile U.S. recovery amid signs that the jobs market has not improved, the nation’s top central banker told lawmakers on Tuesday.
“Recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead,” Bernanke said in testimony prepared for the Joint Economic Committee of Congress.
The dollar slipped to $1.33 versus the euro after topping out at $1.3144 in earlier dealing. This was the dollar’s highest level since mid-January.
The buck also leveled off after hitting a yearly peak versus the sterling, edging to $1.54 from near $1.5350.
On the other hand, the dollar held most its advance versus its Canadian counterpart as oil prices fell. The buck rose to a yearly high of C$1.0635.
There was little movement near Y76.50 versus the yen. The pair has been stuck there for months, since the dollar hit a record low 75.94.
Eurozone finance ministers have decided to put off the decision on the next loan installment for Greece, worth EUR 8 billion, until the troika report on the country’s progress with the fiscal targets is ready.
Eurogroup President Jean-Claude Juncker said early Tuesday that a Eurogroup meeting, tentatively scheduled for October 13 to decide on the next loan tranche for Greece, has been canceled as the troika report will not be ready by then.
Europe’s banks are seen taking a significant hit if Greece must restructure, and ratings agency S&P now sees a 40 percent chance of a double-dip European recession.
“We now estimate the probability of a new recession in western Europe next year at about 40%, although in our baseline forecast we continue to anticipate sluggish and unevenly distributed growth in the coming five quarters,” said Jean-Michel Six, Standard & Poor’s chief European economist.
