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Dollar Slips, helps Euro Digest Disappointing ZEW - (Reuters)

Posted by Chris Advincula on Jul 16, 2013 7:02:00 AM

Tue Jul 16, 2013 6:43am EDT

* Dollar index down 0.2 percent, off recent 3-yr highs

    * Dollar bulls cautious ahead of Bernanke's testimony

    * Euro slips after German ZEW survey, recovers quickly


    By Anirban Nag

    LONDON, July 16 (Reuters) - The dollar fell against a basket

of currencies on Tuesday as investors cut long bets ahead of

testimony by Federal Reserve chief Ben Bernanke that could give

more clues on when U.S. monetary stimulus will be scaled back.

    Data suggested its losses against the euro would remain

muted, with German investor sentiment below expectations and

euro zone inflation highlighting subdued price pressures. That

added to the view that the European Central Bank will keep rates

low to aid an economic recovery. 

    "Volumes are low and unless the data is a huge surprise,

which was not the case, we are not going to see huge moves. Also

investors will stay cautious before Bernanke's testimony," said

Alvin Tan, currency strategist at Societe Generale.

    "In the near term, a euro rise above $1.3200 is a sell."

    The euro was up 0.3 percent to $1.3103, recovering

from $1.3057 struck after the German ZEW sentiment survey. Some

large investors including Asian central banks were lined up to

sell towards $1.3120/50, traders said.

    The common currency's gains saw the dollar index shed

0.2 percent to 82.846. The index hit three-year high of 84.753

on July 9, the day before Federal Reserve chairman Ben

Bernanke's surprisingly dovish comments on withdrawing its bond

buying programme caused heavy selling of the U.S. currency.

    Disappointing U.S. retail sales for June has also dented

expectations of an imminent reduction in stimulus by the Fed,

and weighed down on the dollar.      

    Bernanke is due to testify on Wednesday and analysts expect

him to reiterate that U.S. monetary policy will remain

accommodative. He is likely to keep alive expectations the Fed

will start withdrawing the stimulus later this year, while

making clear it will not tighten policy. That could trigger some

sharp market swings.

    "There is a risk that the dollar could soften a bit more,"

said Jane Foley, senior currency strategist at Rabobank.

    The dollar eased 0.3 percent against the yen to 99.60 yen

, staying above last week's low of 98.20 yen.

    The yen could face some pressure towards the weekend on

expectations that Japan's upper house election on Sunday will

hand Prime Minister Shinzo Abe a big victory, giving him more

freedom to push forward with his agenda to revive the economy

through monetary easing.

    The Australian dollar bounced 1.5 percent to

$0.9225 as market players trimmed bets on further interest rate

cuts following comments from the central bank. The Reserve Bank of Australia said in the minutes of its July meeting that the current policy stance was appropriate.


euro.7.16 resized 600


aud.7.16 resized 600

Charts: WorldWideMarkets Flash Trader


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