LONDON (MarketWatch) — The U.S. dollar held gains versus most major rivals Monday, getting a lift from apparent short covering for a second straight session as investors appeared somewhat disappointed in remarks at the end of last week by Federal Reserve Chairman Ben Bernanke.
“The dollar was steady after early gains amid expectations that the Fed may yet disappoint in their aggregate purchase amounts in their fresh quantitative-easing program,” said Geoffrey Yu, strategist at UBS.
In a speech Friday, top U.S. central banker Bernanke said there was a case for “further action” by the Fed, but he offered few details on the potential size or timing of additional asset purchases. The dollar was driven to lows against several rivals earlier in the week as investors dumped the greenback in anticipation that further quantitative-easing measures would be implemented at the Fed’s Nov. 2-3 meeting.
The dollar index (DXY 77.36, +0.31, +0.41%) , a measure of the U.S. unit against a basket of major global currencies, rose to 77.311 from 77.038 late Friday. The index earlier last week fell to its lowest level since December on widespread dollar selling.
The euro (EURUSD 1.3899, -0.0075, -0.5367%) temporarily fell below the $1.39 level before trimming its loss to stand at $1.3906, down from $1.3964 in late North American trading Friday.
European Central Bank President Jean-Claude Trichet over the weekend rejected a call by Bundesbank President Axel Weber, a member of the ECB Governing Council, to bring the central bank’s bond-buying program to a close.
“No! This is not the position of the Governing Council, with an overwhelming majority,” Trichet said in an interview with the Italian daily newspaper La Stampa, according to an English transcript of the interview on the European Central Bank’s Web site. Read the transcript.
The dollar was back under pressure against the Japanese yen (USDYEN 81.3300, -0.0900, -0.1106%) , however, slipping to 81.24 yen from ¥81.49 on Friday, during which the dollar slumped to the weakest in nearly 15 years — below ¥81.
The Australian dollar (AUDUSD 0.9865, -0.0039, -0.3938%) was unable to build on its push above parity versus the U.S. dollar last week, changing hands at 98.69 U.S. cents, down from 98.83 cents late Friday.
The British pound (GBPUSD 1.5892, -0.0091, -0.5694%) fell 0.6% to trade at $1.59 in recent action. The euro rose 0.1% versus the pound to trade at 87.48 pence.
“The last time the dollar rallied for two successive days was on Sept. 6-7, but as we have more QE [quantitative easing] priced in now in the U.S.,” said Kenneth Broux, senior market economist at Lloyds TSB.
But there may be room for further upside for the dollar over the remainder of October into the November midterm U.S. elections, he wrote in a research note.
Broux said the dollar could advance on the British pound in particular if minutes of the October policy meeting of the Bank of England prove “particularly dovish,” indicating the central bank is leaning toward resuming its own quantitative-easing program in coming weeks.
