MW:Dollar edges higher as investors await Bernanke
By William L. Watts and Michael Kitchen, MarketWatch
FRANKFURT (MarketWatch) — The safe-haven U.S. dollar and Japanese yen traded slightly higher Monday as investors focused on testimony later this week from U.S. Federal Reserve Chairman Ben Bernanke.
The dollar index DXY +0.41% , which tracks the U.S. currency against six other units, ticked higher to 83.568, up from 83.324 late Friday in North America.
Against the yen, however, the dollar USDJPY -0.48% eased to 78.99, down from 79.29 late Friday.
The euro EURUSD -0.55% lost ground, slipping to $1.2191 from $1.2245 but holding above a two-year low of $1.2156 hit Friday. Read more on Friday’s currency action
When it comes to the euro, “the market is short, and bearish and very comfortable. We don’t like being consensus but there is little point being contrarian just for the sake of it, and with the ECB warming to the idea of ‘burden-sharing’ by the bondholders of rescued banks, there remains no good news for the euro,” wrote Kit Juckes, head of foreign exchange at Société Générale, in a note.
The Wall Street Journal reported that the ECB, in a major reversal, has advocated imposing losses on holders of senior bonds issued by Spain's most troubled banks, although finance ministers have rejected such a move. Read about the ECB’s shift
Meanwhile, Barclays analysts said in a note Monday that Bernanke’s semiannual testimony to Congress, slated for Tuesday and Wednesday, would provide near-term focus for the forex markets, with the greenback likely to gain unless the Fed chief suggests fresh policy-easing moves are coming soon.
“Chairman Bernanke is not likely to give an indication that further easing is imminent. That added to negative earnings surprises in the U.S. may weigh on risk sentiment in the near term, boosting the [U.S. dollar] more broadly,” they said.
Strategists at Crédit Agricole said that even if Bernanke did sound a dovish note during the testimony, the dollar could make gains anyway.
“Despite the recent buildup [in] long positions, we do not see [the dollar] as particularly vulnerable to a more accommodative policy stance, should such a shift be perceived. Indeed, to the contrary, the outlining of additional Fed stimulus options could work to the [dollar’s] benefit, given currently heightened levels of investor risk aversion surrounding Europe,” they said, in terms of the dollar’s value against the euro.
Crédit Agricole tipped the euro to “remain relatively stable above $1.2050” for the beginning of the week.
Among other major currency pairs, the British pound GBPUSD -0.17% slipped to $1.5545 from $1.5578 late Friday, while the Australian dollar AUDUSD -0.25% declined to $1.0216 from $1.0227.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
