By William L. Watts and Lisa Twaronite, MarketWatch
LONDON (MarketWatch) — The U.S. dollar was mostly lower versus major rivals Friday after U.S. Federal Reserve Chairman Ben Bernanke defended the central bank’s quantitative-easing program.
The euro, meanwhile, held on to gains as worries about Ireland’s budget problems eased while talks continued among European Union, International Monetary Fund and Irish officials over a potential bailout.
“Fully aware of the important role that the dollar plays in the international monetary and financial system, the [Federal Open Market Committee] believes that the best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in the context of price stability in the United States,” Bernanke said in a speech delivered at a conference at the European Central Bank. Read more on Bernanke’s speech
The Fed released the text of the speech late Thursday night in Washington.
Bernanke also implied that China’s decision not to allow the yuan to rise more rapidly has essentially thrown a wrench into the global economic recovery.
The dollar index (DXY 78.48, -0.13, -0.17%) , which measures the greenback against a basket of six other major currencies, fell to 78.388 from 78.644 in North American trade late Thursday.
The euro (EURUSD 1.3675, +0.0032, +0.2346%) rose to $1.3671 from $1.3630 in late North American trading Thursday. See real-time currency quotes and tools
“Talks in Dublin are likely to continue into the weekend, while investors have warmed to the idea that Ireland will accept help, reducing recent fears over contagion within the euro zone,” said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Conn.
Meanwhile, Beijing’s decision to further tighten its reserve ratio requirements dented risk appetite. The Australian dollar (AUDUSD 0.9840, -0.0059, -0.5961%) , which is highly sensitive to sentiment on Chinese economic prospects, remained 0.6% lower at 98.46 U.S. cents.
The People’s Bank of China announced Friday that it would raise the reserve requirement ratio for banks by half a percentage point as authorities attempt to battle inflationary pressures. The hike, effective Nov. 29, will bring the reserve requirement for the nation’s four largest state-owned banks to 18.5%, while the ratio for smaller banks will stand between 16% to 16.5%. Read about the rise in the reserve ratio.
The move comes amid growing expectations Beijing will soon raise interest rates.
“The [reserve ratio] does little to address food and energy inflation, which local press is making out to be a huge issue in China currently, and as such, it would not surprise us if China hiked the interest rate over the weekend or in the near future,” said W. Brad Bechtel, managing director at Faros Trading in Stamford, Conn. Read about odds of a rate hike.
The British pound (GBPUSD 1.5990, -0.0048, -0.2993%) slipped to $1.5978 from $1.6042 late Thursday.
The dollar (USDYEN 83.4300, -0.1200, -0.1437%) slipped against the Japanese yen, trading at ¥83.44, down slightly from ¥83.53 Thursday.
