MW:U.S. dollar slips before Fed chairman testimony
By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — The U.S. dollar extended its fall Tuesday on hopes Federal Reserve Chairman Ben Bernanke might, in his testimony to U.S. lawmakers later in the day, hint at another round of monetary stimulus to support the economy.
The ICE dollar index DXY -0.08% , which measures the greenback’s performance against a basket of six major global currencies, slipped as low as 82.911 earlier in the Asian session from 83.088 late in North America, before recovering a little.
In Tokyo afternoon trade, the index was at 83.029. The gauge had slipped on Monday after a lackluster U.S. retail sales report.
“After the dismal retail sales report yesterday, market participants are raising their hopes for the Fed chairman to bring up QE3 at his Senate testimony later today,” said Woon Khien Chia, head of emerging markets research at Royal Bank of Scotland.
Chia was referring to the third round of asset purchases, the so-called quantitative easing, a mechanism to stimulate the economy by injecting money into the financial system.
“With no major data releases scheduled for the day ahead, any letdown by the Fed chairman’s speech could cause a sharp sell-off in Asian currencies. But note that the testimony lasts two days,” she added.
The Fed Chairman is due to testify before the Senate Banking Committee later on Tuesday, and then before the House Financial Services panel Wednesday. Read more on what to expect from the Fed Chairman’s testimony.
Among major U.S. dollar currency pairs, the euro EURUSD +0.14% was fetching $1.2284, inching further up from 1.2274 late Monday and the British pound GBPUSD +0.12% was trading at $1.5653 from $1.5633.
Against the Japanese unit, the dollar USDJPY +0.09% was changing hands for 79.92 yen, compared with ÂĄ78.84. The Australian dollar AUDUSD +0.48% was going for $1.0293 from $1.0235.
The greenback’s broad decline came against the backdrop of a rally in Asian stock markets, amid rising expectations that China may itself deliver more monetary and fiscal stimulus to lead an economic recovery in the second half of this year. Read more in Asia Markets.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.
