Bernanke comments hurt US dollar

Bernanke comments hurt US dollar

Story link: Bernanke comments hurt US dollar

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The US dollar weakened versus the euro on Thursday after Federal Reserve Chairman Ben Bernanke said in testimony before the Budget Committee of the House of Representatives that the Fed is ready to take “substantive action� to aid the economy because of the risks to growth to the US economy.

His comments led to heightened speculation that the Fed will cut interest rates at least twice before the end of the first quarter and that the cut at the end of this month would be by at least half a percentage point.

However, even as Mr. Bernanke supported the idea of a stimulus plan to help the US economy, he fell short of predicting that there exists now or will be a recession.

The dollar was also hurt by a report from Merrill Lynch (NYSE: MER; TYO: 8675) that its losses in the fourth quarter were double what had been estimated, amounting to $4.82 per share, or almost $10 billion.

While Bernanke’s remarks hurt the dollar, new comments from Yves Mersch, a member of the European Central Bank’s board, reversed his position in an interview Wednesday that the ECB could cut interest rates this year helped the euro to gains against the dollar but it still fell in relation to the yen.

At nearly 1 p.m. in New York, the dollar traded at $1.4691 to the euro while it cost ¥157.3132 to buy a euro.

The yen was stronger against almost all major currencies as deepening worries over the US economy sent investors fleeing from risky trades.

The yen traded at ¥107.0850 to the US dollar and at ¥211.2089 to the pound.