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Dollar Strengthens Amid Speculation Before Bernanke Speech

Wednesday, 24 Aug 2011 10:47 PM

 

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Aug. 25 (Bloomberg) -- The dollar gained against the majority of its most-traded peers amid speculation on what steps Federal Reserve Chairman Ben S. Bernanke will outline tomorrow to stimulate the U.S. economy.

The greenback advanced as investors bet on whether Bernanke will signal a willingness to consider a third round of bond purchases, or QE3, when he delivers a speech at Jackson Hole, Wyoming as reports showed U.S. growth maintaining momentum. The euro fell before a private report forecast to show German consumer confidence will probably drop in September. The yen gained even after Japan’s government announced yesterday a $100 billion fund designed to cope with strength in the currency.

“I’d have a bias toward more U.S. dollar buying as I just don’t see Bernanke as coming out and delivering anything too dramatic on the QE3 front,” said Mike Burrowes, a currency strategist at Bank of New Zealand Ltd. in Wellington. “There’s a bit of a battle going on between risk sentiment and a reassessment of QE3.”

The dollar traded at $1.4403 per euro as of 10:58 a.m. in Tokyo from $1.4414 in New York yesterday, when it gained 0.2 percent. It fetched 76.91 yen from 76.98 after rising 0.4 percent yesterday. The euro fell to 110.76 yen from 110.96 yen.

The greenback has moved within a two-cent range against the euro this week, between $1.4347 and $1.45, before Bernanke speaks at the Kansas City Fed’s annual economic conference. The address will come amid speculation that a slowing U.S. economy and Europe’s debt crisis will hobble global growth.

Fed’s Options

Bernanke told Congress in July the Fed’s options to bolster the economy include increasing the average maturity of its bond portfolio and cutting the interest rate on excess reserves, as well as buying more debt and keeping rates low.

At last year’s Jackson Hole conference, he said the Fed would “do all that it can” to ensure a continuation of the economic recovery and that buying more debt might be warranted if growth slowed. Two months later, the Fed announced a $600 billion second round of asset purchases that ended in June.

U.S. jobless claims declined by 3,000 to 405,000 in the week ended Aug. 20 from the previous week, Labor Department figures will show today, according to a Bloomberg survey of economists. Bookings in the U.S. for goods meant to last at least three years rose 4 percent in July, a Commerce Department report showed yesterday. That compares with economists’ prediction for a 2 percent increase.

Nuremberg, Germany-based market research company GfK SE will say today that its consumer sentiment index will decline to 5.1 next month from 5.4 in August, according to a Bloomberg News survey of economists.

“If it’s weak it will probably highlight to markets that the European debt crisis is starting to impact confidence in the core economies and particularly Germany, which is really seen as supporting euro-zone growth in general,” Burrowes said.

European Union lawmakers will hear from EU finance chiefs Aug. 29 in Brussels about steps to manage the debt crisis. The European Parliament’s economic committee received confirmation European Central Bank President Jean-Claude Trichet will attend, said Marjory van den Broeke, a spokeswoman for the assembly.

--Editors: Jonathan Annells, Naoto Hosoda

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

© Copyright 2014 Bloomberg News. All rights reserved.

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