Dollar mixed against major currencies

AP News
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Posted: Mar 01, 2011 3:38 PM
Dollar mixed against major currencies

Trading in the dollar was mixed Tuesday as Federal Reserve Chairman Ben Bernanke downplayed the risk of runaway inflation, reinforcing expectations that U.S. interest rates will remain low.

Bernanke said in testimony to Congress that a lasting increase in the price of oil could harm the economy, but that rising oil prices would more likely have a modest effect on inflation. The Fed chief also said the economy still needed help from the central bank's $600 billion bond-buying stimulus program. That program, designed to lower interest rates and make lending easier, is set to end in June. Lower rates tend to drag on a currency's value.

The euro fell to $1.3770 late Tuesday from $1.3800 Monday. The British pound edged lower to $1.6262 from $1.6267, while the dollar rose to 81.95 Japanese yen from 81.77 yen.

The dollar has struggled this year, touching a four-month low against a group of six major currencies Tuesday. The recent unrest in the Middle East and North Africa, home to the world's major oil producers, has triggered concerns that oil prices will climb into the triple digits and stay there, which could dent consumer spending on other goods in the U.S., hurting economic growth.

Oil prices on late Tuesday traded over $99 a barrel.

Investors also expect other central banks will feel pressed to raise interest rates to cope with surging oil and food prices, while the Fed is likely to hold off on raising rates until at least next year, said Avery Shenfeld, a senior economist at CIBC World Markets. Higher rates can help counter inflation.

The dollar did get a slight bump after the Institute for Supply Management said its manufacturing index rose to 61.4 last month, the highest level since May 2004. The weaker dollar has helped U.S. manufacturers sell their goods overseas. A weaker currency makes exporters' wares cheaper abroad.

In other trading Tuesday, the dollar rose to 97.49 Canadian cents from 97.14 Canadian cents, ticking up from its lowest point in more than three years _ of 96.80 Canadian cents. Canada is a major exporter of oil and other raw materials, and rising prices for the country's exports has helped boost the currency.

The dollar also edged up to 0.9303 Swiss franc from 0.9289 Swiss franc.