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Aug. 26 (Bloomberg) -- The dollar gained versus the currencies of major U.S. trade partners after Federal Reserve Chairman Ben S. Bernanke failed to signal new measures to shore up the economy that would risk debasing the greenback.
The Dollar Index reversed losses after Bernanke said the central bank still has tools to stimulate the economy without signaling when or whether policy makers might deploy them. Data showed the U.S. economy grew more slowly than previously estimated. The yen gained against most major peers as investors sought haven assets.
“The key point from the speech was that he didn’t signal any new Federal Reserve easing,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. “There was no real expectation for any new signal or policy measures today, but there was some hope that Mr. Bernanke could have pulled a rabbit out of the hat and given the markets something.”
The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trade partners including the euro and yen, rose 0.1 percent to 74.342a at 10:53 a.m. in New York, compared with 74.279 yesterday. Earlier it fell 0.5 percent.
The dollar gained 0.1 percent to $1.4362 per euro and was up 0.2 percent for the week. It weakened 0.6 percent to 76.98 yen and climbed 2.4 percent to 81.16 Swiss centimes. The yen appreciated 0.8 percent to 110.55 per euro.
The U.S. currency has traded within a two-cent range between $1.4328 and $1.45 against the euro this week as investors considered what Bernanke would say today.
‘Range of Tools’
“In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus,” Bernanke said today to central bankers and economists gathered at an annual forum in Jackson Hole, Wyoming.
Last year at the conference, Bernanke said the Fed would “do all that it can” to ensure a continuation of the economic recovery and that buying more debt might be warranted if growth slowed. Two months later, policy makers announced a $600 billion second round of asset purchases that ended in June.
Policy makers pledged after a meeting Aug. 9 to hold the benchmark interest rate at almost zero until at least mid-2013 after growth that was “considerably slower” than anticipated.
Grew More Slowly
The euro pared earlier gains after Commerce Department data showed U.S. gross domestic product grew at a 1 percent annual rate from April through June, down from a 1.3 percent prior estimate. The median forecast of economists surveyed by Bloomberg News called for a 1.1 percent increase. The expansion capped the weakest six months of the economic recovery that began in mid-2009.
The global economy has a 50 percent chance of slipping into recession as the economies of Europe and the U.S. struggle to grow, the Nobel laureate and New York University professor Michael Spence said yesterday in a Bloomberg Television interview in Hong Kong.
The dollar has declined 1.4 percent in the past three months against nine developed-nation peers, according to Bloomberg Correlation-Weighted Currency Indexes. The euro has appreciated 0.3 percent and the yen has gained 4.8 percent.
The yen advanced for the first time in three days versus the dollar as Japan’s Prime Minister Naoto Kan said he was stepping down after parliament passed the final two pieces of his legislative agenda.
“I feel I’ve done everything I could under these difficult conditions,” Kan told Democratic Party of Japan lawmakers at a nationally televised meeting today in Tokyo.
Japan’s government will outline measures on Aug. 29 to help the nation cope with a stronger currency, the Nikkei newspaper reported, without citing where it obtained the information.
The euro strengthened earlier against the greenback after the Financial Times reported officials from the 17-nation currency union will discuss a new version of Finland’s collateral agreement with Greece.
The “euro working group” is examining a non-cash collateral arrangement through which Greece would put up either property or equity in state-owned enterprises and financial institutions as a guarantee against euro-area bailout loans, citing unidentified European officials.
Standard & Poor’s, Moody’s Investors Service and Fitch Ratings all said yesterday they continue to rate German government debt at AAA with a stable outlook. That supported the euro, said Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB.
“The talk about collateral for Greek debt also perhaps helped,” Kotecha said.
The Swiss franc weakened against most major counterparts after an index of leading indicators dropped more than economists forecast, adding to signs the currency’s recent strength may be damaging the nation’s growth.
The franc tumbled 2.2 percent to 1.1655 per euro today and has lost 3 percent this week.
--Editors: Greg Storey, Dennis Fitzgerald
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