Dollar rises against euro on Bernanke comments

AP News
Posted: Feb 29, 2012 3:31 PM
Dollar rises against euro on Bernanke comments

The dollar turned higher against the euro after comments from Federal Reserve Chairman Ben Bernanke made it seem less likely that the Fed will buy more bonds to stimulate the U.S. economy.

Bernanke told lawmakers in Washington that the employment rate has improved more than expected. Analysts and traders interpreted his comments to mean that another round of bond-buying program won't happen.

That's good news for the dollar. Bond buying lowers interest rates and increases money supply. With more money in circulation, the value of the dollar that traders are holding decreases. The lower interest rates would make the dollar less attractive than other currencies that have higher interest rates.

The euro fell to $1.3337 in late trading Wednesday from $1.3459 late Tuesday.

Before Bernanke spoke, the euro rose against the dollar after the European Central Bank said it made $712.4 billion in low-interest loans to banks.

The central bank made its first round of such loans in late 2011 to insure that European banks continue to lend money and avoid a financial crisis. Economists and traders believe the loans will help ease Europe's debt crisis.

In other trading, the British pound rose to $1.5925 from $1.5888. The dollar fell to 98.89 Canadian cents from 99.62 Canadian cents.

The dollar rose to 81.18 Japanese yen from 80.55 yen and to 0.9039 Swiss franc from 0.8954 Swiss franc.