Dollar trades in narrow ranges ahead of Bernanke

AP News
Posted: Aug 22, 2011 4:29 PM
Dollar trades in narrow ranges ahead of Bernanke

The dollar traded in a tight range Monday ahead of a key speech on Friday by Federal Reserve Chairman Ben Bernanke.

"We're treading water, in a watch-and-wait mode in anticipation of events yet to come this week," said Bank of New York Mellon currency analyst Michael Woolfolk. Bernanke is slated to speak at a major economics conference in Jackson Hole, Wyo., on Friday.

His speech could have a major impact on markets, as it did last year when he hinted that the Fed was about to embark on a new round of bond buying to support financial markets and the economy.

The buying program, or "QE2," ended in June. Some investors hope that Bernanke will reinstate bond purchases because of recent evidence of a weakening U.S. economy that triggered a stock market sell-off in August. The Friday speech could offer a similar hint this year.

Bond-buying is meant to drive interest rates lower, prompting easier credit to support the economy. But lower rates tend to weigh on a currency.

Last year's speech sent the dollar on a long dive as investors factored in the start of QE2, or the second round of the so-called quantitative easing program.

In late trading Monday, the euro dipped to $1.4373 from $1.4387 late Friday. The British pound was nearly unchanged at $1.6484 from $1.6482.

The dollar rose to 76.72 Japanese yen from 76.48 yen late Friday. Earlier on Friday, the dollar hit a post-World War II low of 75.94 yen. The dollar also edged up to 0.7903 Swiss franc from 0.7879 franc.

The central banks of both Switzerland and Japan have tried to curb the gains in their currencies this month. The yen and franc, like gold, have become the world's favored safe havens.

The dollar slipped to 98.93 Canadian cents from 98.96 cents, and was also weaker against the Norwegian krone and the Australian dollar. Those countries are commodity exporters whose central banks have set higher interest rates than the nearly zero rate in the U.S. Their currencies tend to gain when investors feel more confident about the global economy, and expect that countries will have more need of raw materials as their economies grow faster.

But gold, the safe haven asset of choice for investors at the moment, also shot up to a new record at $1,899.40.