Dollar Edges Lower Waiting for Bernanke Testimony
Wed, Feb 24, 10:12 AM ET, by Scott V. Nystrom
The U.S. dollar edged downward on Wednesday morning as traders are anxiously waiting for Federal Chairman Ben Bernanke’s testimony before Congress on the state of the economy and monetary policy. Traders aren't expecting to hear any new information on the exit strategy from quantitative easing. The Fed has already taken symbolic "tightening" actions by terminating various special credit facilities, increasing the discount rate 25 basis points from 0.5 percent. In addition, just yesterday the Treasury revived the Supplementary Financing program, draining about $200 billion of liquidity. It is always a big event for currency markets when the Federal Reserve Chairman testifies because the Chairman is often asked questions about the economy and monetary policy. The last time Mr. Bernanke spoke was on February 10, about one week before the central bank announced the surprise 25 basis point hike in its discount rate. Comments by Bernanke could rally the dollar if he answers questions with a hawkish tone and introduces new ideas for tightening monetary policy in the near future. Higher interest rates would be bullish for the dollar and bearish for hard assets, including gold. The U.S. dollar index, a trade-weighted basket of six major currencies traded against the greenback, is at 80.780 just before the Fed chief's testimony, down from 80.874 in late trading yesterday. The euro edged slightly higher to change hands at $1.3562, up from $1.3534 or 0.4% on Tuesday. Traders expect the euro will continue a downward bias as fears over Greece’s sovereign debt crisis continue to chip away at the European common currency. Unions are balking against austerity measures to reduce Greece's annual budget deficit. Greek unions staged a one-day strike on Wednesday. The greenback had gained on Tuesday against most major currencies other than the Japanese yen, on concerns about the pace and sustainability of the global recovery after a drop in German business confidence and lower consumer sentiment in the U.S. were reported.
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