Today Forex News

Dollar Weakens as Bernanke Cites Growth Risk, Inflation Danger

July 15 (Bloomberg) -- The dollar dropped against the euro as Federal Reserve Chairman Ben S. Bernanke told a Senate committee that growth and inflation risks have both increased.

The currency weakened the most against the yen since the March collapse of Bear Stearns Cos. as Bernanke said helping financial markets return to more normal functioning remains ``a top priority.'' The dollar earlier touched a record low versus the euro on concern confidence in Fannie Mae and Freddie Mac will diminish even after the U.S. government pledged support.

``It's hard to find anything dollar positive in the statement,'' said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York. ``Bernanke clearly acknowledged more growth risks than he anticipated a few weeks ago. The problem is coming from the financial sector.''

The dollar declined 0.4 percent to $1.5976 per euro at 10:25 a.m. in New York, from $1.5908 yesterday, and touched $1.6038, the weakest level since the 15-nation currency's debut in 1999. The U.S. currency fell 1.7 percent to 104.35 yen, from 106.14 yesterday. Japan's currency increased 1.3 percent to 166.74 per euro, from 168.89 yesterday, when it weakened to the all-time low of 169.75.

The U.S. currency has given up all the gains made versus the euro since July 3, when European Central Bank President Jean-Claude Trichet said he has ``no bias'' on future interest- rate moves.

The dollar strengthened 0.6 percent to $1.5706 per euro that week. It has since slumped almost 2 percent on concern Fannie Mae and Freddie Mac, which buy or finance almost half the $12 trillion of U.S. mortgages, will need a government rescue.

The Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, fell for a fifth day on the ICE market, dropping as much as 0.8 percent to 71.314, the lowest level since April 23, from 71.915.