By William L. Watts and Virginia Harrison, MarketWatch FRANKFURT (MarketWatch) — The dollar softened in thin trade Monday, undercut by rising investor appetite for risk after U.S. Federal Reserve Chairman Ben Bernanke on Friday signaled no immediate round of additional stimulus but left options open. Bernanke’s remarks at a conference of central bankers and policy makers in Jackson Hole, Wyo., were credited with lifting stocks in Asia and contributing to further gains in Europe and by U.S. stock-index futures. The dollar generally tends to weaken when risk appetite is on the rise and to gain when investors shun risk and seek safe havens. “The market’s take from Bernanke circa 2011 seems to be: go long risk,” said David Watt, senior currency strategist at RBC Capital Markets. The dollar index DXY -0.01% which measures the greenback against a basket of six other currencies, rose to 73.836, from 73.825 in North American trading late Friday. Strategists noted thin overall volume, with British markets closed for a public holiday. Mixxed assessment Some strategists tied the boost in risk appetite to remarks by Bernanke signaling that the Fed would keep its options open and could yet provide a further round of stimulus if the U.S. economy weakens further. “Although Bernanke did not signal new steps to promote growth, he kept all options open, which ultimately helped risk sentiment. Fears that Hurricane Irene would wreak havoc in New York City have proved largely unfounded,” also helping to lift equities, said Chris Walker, currency strategist at UBS. Others argued that the markets were buoyed by the lack of a more downbeat assessment of economic prospects by Bernanke, while others said the speech is having little impact on sentiment. “We don’t think the Bernanke speech was very important for markets,” wrote strategists at KBC Bank in Brussels. “No key resistances or supports were triggered in the bond, equity or currency markets. Therefore, markets will start looking to the new [economic] data to be published this week in the U.S.” The euro EURUSD -0.02% traded at $1.4509, up from $1.4483 in North American trading late Friday. European markets were buoyed as two of Greece’s largest banks, Alpha Bank SA and EFG Eurobank Ergasias SA, announced a merger agreement. The British pound GBPUSD +0.18% rose to $1.6398 from $1.6341 in North American trading late Friday. The dollar temporarily strengthened in Asian trading hours Monday, with the Japanese yen losing ground as the ruling party there prepared to select a new prime minister. In recent action, however, the dollar USDJPY -0.14% slipped to ¥76.62, compared to ¥76.71 yen in North American trading late Friday. Lawmakers from the ruling Democratic Party of Japan on Monday chose Finance Minister Yoshihiko Noda as the next leader of the party, all but ensuring he will succeed Naoto Kan to become the nation's sixth prime minister in five years. Read more: Noda wins Japan’s DPJ leadership battle. “The transition could derail confidence in the government’s ability to address the risks surrounding the region, as policy makers come under increased scrutiny,” said David Song, currency analyst at the DailyFX. “In turn, the central bank may have little choice but to step up its efforts to shore up the economy, and we may hear the Bank of Japan announce additional measures next month as the region struggles to recover from the devastating earthquake and tsunami from earlier this year,” Song said.

Source