LONDON: The dollar steadied against the euro and was expected to hold its ground as investors scaled back bets Federal Reserve Chairman Ben Bernanke would signal more imminent monetary easing in a speech later on Friday. While the dollar may strengthen if Bernanke does not flag further stimulus at his 1400 GMT speech in Jackson Hole, Wyoming, many strategists said the euro would hold around $1.25 on expectations the European Central Bank will announce steps to tackle the euro zone debt crisis at its Sept. 6 policy meeting. Instead, the greenback would be more likely to rally against growth-correlated currencies such as the Australian dollar. "The market is being more realistic about what to expect. There's recognition Bernanke cannot pre-commit to easing at the September meeting, so we're likely to get a laundry list of what he could do if necessary," HSBC FX strategist Daragh Maher said. "Euro/dollar will be constrained by Draghi next week so you need to look at pairs like Aussie/dollar and dollar/Norwegian crown to see what the appetite for the dollar is." The euro was up 0.1 percent at $1.2521. For the last week it has been pegged in a tight range between $1.2465 and $1.26, with market players reluctant to take large positions in the run up to Bernanke's speech. The dollar index was down 0.1 percent at 81.607. Money printing by the Fed tends to cheapen the dollar, which declined in August on expectations Bernanke could hint that a third round of economic stimulus would be announced in September. Those expectations appeared to be waning as investors focused on a recent improvement US economic data. US consumer spending rose by the most in five months in July, while the number of Americans filing new claims for jobless benefits held steady last week. Atlanta Fed President Dennis Lockhart, seen as a centrist voter on US monetary policy, said on Thursday it would be a "close call" when central bank policymakers meet next month to decide whether to ease policy more. "Market expectations on (Bernanke's) Jackson Hole speech have receded a bit. He is unlikely to give clear signals as recent economic data has not been so bad," said Yunosuke Ikeda, senior FX strategist at Nomura Securities. Traders said if Bernanke explicitly signals imminent easing, the safe-haven yen could come under pressure against commodity currencies, which tend to benefit from increased liquidity. The dollar fell 0.1 percent to 78.48 yen, while the euro was steady at 98.24 yen. Although Bernanke's speech was in focus, many traders said next week's ECB meeting would have a bigger impact on the euro. Speculation the ECB will announce a plan to start buying Spanish and Italian bonds to lower borrowing costs has supported the single currency.

Source