Dollar rebounds as Fed chairman vague on further easing

The dollar rebounded on Tuesday after Ben Bernanke, the Federal Reserve chairman, said that the central bank is ready to bolster a stumbling US economy but gave few details.

Invested had positioned themselves for Bernanke to offer more hints about additional monetary easing and when measures to boost the economy were not specified, they looked back towards the dollar. Any indications of a further wave of quantitative easing was likely to hit the greenback, as it would mean pumping more dollars into the financial system, which would weaken the currency’s value.

New York-based BK Asset Management managing director Kathy Lien said that Bernanke’s testimony brought about nothing new, and the fact that he stayed clear of mentioning any particular steps clearly indicates that there is not likely to be new stimulus or an increase in asset purchases in August.

Bernanke said the central bank stands ready to offer further support to the US’s slowing economy, but did not talk about specific measures. He went on to say that the country’s recovery is being affected by the debt crisis in Europe and uncertainty over the US fiscal policy.

The single currency fell to session lows versus the greenback at $1.2187 following Bernanke’s comments. It last stood at $1.2218, 0.5 per cent down on the day.