By William L. Watts and Sarah Turner, MarketWatch
LONDON (MarketWatch) — The dollar dropped on Friday in cautious action ahead of a closely-awaited speech by Federal Reserve Chairman Ben Bernanke, with investors eager for any clues as to whether the central bank is prepared to embark on an additional round of monetary stimulus.
The ICE dollar index DXY -0.80% , which measures the greenback against a basket of six other major currencies, dropped to 81.045, from 81.704 in late North American trading Thursday.
The WSJ dollar index XX:BUXX -0.67% , which uses a slightly larger basket, fell to 70.72 from 71.17 late the previous session.
Bernanke is scheduled to speak at a symposium of global central bankers in Jackson Hole, Wyo., at 10 a.m. Eastern time.
“The majority view is that he will not explicitly signal further [quantitative easing]. However, most expect that he will signal the Fed’s intent to ‘do more’, and outline what policy options remain. Will that be enough to turn around market sentiment which has seen equities dribble lower in recent days? I hope,” wrote Kit Juckes, currency strategist at Société Générale.
Michael Turner, a strategist at RBC Capital Markets, said Jackson Hole “has cast an apathetic shadow on markets.”
“The debate is now over the diminishing marginal returns of further action, and the focus will therefore be on the weight that Bernanke attaches to the various pros and cons, should he outline them in more detail,” Turner said.
“His recent written response to a politician suggests that he still sees merit in further asset purchases, and as our U.S. economists point out, data haven’t been that great since the [Federal Open Market Committee] last met,” said Turner.
The euro EURUSD +0.8632% rose to $1.2618 from $1.2504 late Thursday.
Germany’s Bild newspaper reported Friday that Bundesbank chief Jens Weidmann had considered resigning in recent weeks amid frustration with plans by the European Central Bank to embark on a new round of bond purchases, but was persuaded to stay. The Bundesbank said it had no comment on the report. Read: Bundesbank chief considered quitting: report.
The British pound GBPUSD +0.6293% advanced to $1.5884 from $1.5788.
The Japanese yen also gained ground, as the dollar USDJPY -0.3097% bought ¥78.43, down from ¥78.65 late Thursday. Data on Friday showed an unexpected drop in Japanese industrial output in July, although household spending for the same month was stronger than expected. Read more on Japanese data.
The Australian dollar AUDUSD +0.5005% changed hands at $1.0335, up from $1.0295 late Thursday.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt.
Sarah Turner is MarketWatch's bureau chief in Sydney.
