Dollar gains on tapering outlook, Bernanke testimony

The dollar gained versus most major peers amid speculation Federal Reserve Chairman Ben S. Bernanke will reduce the central bank’s monetary stimulus program as the economy gains.

The yen (FOREX:USDJPY) fell for a second day against the dollar on bets Group-of-20 finance ministers and central bankers meeting this week will endorse Bank of Japan monetary easing designed to stoke inflation to 2%. The greenback remained higher versus the yen and euro after claims for jobless benefits in the U.S. fell. Bernanke speaks to the Senate today after telling a House panel yesterday he would take a wait-and-see stance on slowing stimulus.

“People haven’t really changed their view of when tapering is going to occur,” Dan Dorrow, head of research at Faros Trading LLC in Stamford, Connecticut, said of the U.S. data in a telephone interview. “The Fed has said we really need to have cumulative data. We’re in Bernanke mode right now.”

The dollar (NYBOT:DXU13) advanced 0.8% to 100.40 yen at 10:08 a.m. New York time and touched 100.53. It appreciated 0.3% to $1.3087 per euro in a second daily advance. The 17-nation currency gained 0.6% to 131.42 yen and reached 131.47.

The greenback increased its gain versus the yen after the Philadelphia Fed’s general economic index increased to 19.8 in July, more than double the forecast of 8 in a Bloomberg survey, from 12.5 the prior month. Readings greater than zero signal expansion in the region.

Bernanke, who’s due to deliver his semi-annual report on monetary policy to the Senate Banking Committee at 10:30 a.m. in Washington, said told the House Financial Services Committee yesterday the Federal Open Market Committee wants to assure that the U.S. economy and labor markets have sufficient momentum before reducing asset purchases.

Aussie Slides

Australia’s dollar declined versus all of its 16 most- traded counterparts after a report showed the nation’s businesses turned pessimistic about near-term prospects, adding to the case for an interest-rate cut next month by the central bank. The currency decreased 0.7% to 91.70 U.S. cents after earlier falling 1.1%, the most in almost a week.

South Africa’s rand declined for the first time in five days after the International Monetary Fund said growth in China, the biggest buyer of South African raw materials, may trail forecasts. The currency weakened 0.3% to 9.8531.

JPMorgan Chase & Co.’s Global FX Volatility Index, a measure of currency fluctuations, slid to 9.97%, the lowest on an intraday basis since June 5. It reached a one-year high of 11.96% on June 24.

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