Dollar hit by dovish Fed

The dollar held near a one-month low on a basket of currencies today after Ben Bernanke, the chairman of the Federal Reserve, indicated that supportive monetary policy would stay and kept hopes alive of further stimulus for the economy in the US, reports Reuters.

The dollar index stood at 78.925, near to an overnight low of 78.870, when Bernanke revealed that the central bank’s low interest rate policy was needed to reduce the jobless rate and made it clear that he was in no hurry to reverse course.

Societe Generale strategist Sebastien Galy said that his claim that unemployment was predominantly cyclical and not structural caught the imagination of the market. He went on to say it suggests that QE3 in nearing or that it is at least an extremely dovish stance until the time arrives when unemployment has dropped enough, referring to another wave of quantitative easing.

Bernanke’s comments, along with the unexpected increase in German business sentiment resulted in a boost in risk appetite, weighing on the yen and lifting the euro. The euro went up to as high as $1.3367 from a low on Monday of $1.3190, bringing it near to resistance at $1.3372, the retracement of 74 per cent of its fall between late February and mid-March. The euro was last at $1.3360.