Dollar, sterling strengthen

Dollar, sterling strengthen

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The US dollar strengthened on Tuesday after comments Monday night by US Federal Reserve Chairman Ben Bernanke which were interpreted as positive and therefore indicative that the Fed will issue another interest rate hike when it meets later in the month. Among other things, he said that low long-term yields on Treasury bonds are a positive for the economy.

The greenback was 0.8 percent higher versus the euro at $1.208. The dollar also gained 0.8 percent on the yen to ¥117.21 and added 0.6 percent in relation to sterling to trade at $1,7457.

Sterling was stronger against the euro and the Swiss franc after early declines on the day when new UK inflation data was at expected levels, raising the chances that interest rates will remain where they are for the rest of the year.

Sterling was up 0.3 percent to £0.6918 versus the euro and gained 0.4 percent to SFr2.275 in relation to the Swiss franc.

Elsewhere, the Icelandic krona dropped 2.8 percent against the US dollar to IKr71.44 after Danske Bank issued a warning that there is a good chance of financial crisis in Iceland. If this happens, the Bank said, the krona could lose 25 percent or more of its value. Other analysts were critical of the report, saying that conditions are not as dire as the warning implies.

The Hungarian forint also declined again in relation to the euro, declining 0.9 percent to Ft264.43. The Polish zloty was also down, dropping 0.4 percent to 3.896 zlotys to the euro on the possibility that snap elections might be called soon.