CURRENCIES: Dollar Eases After Bernanke Comments

November 20, 2013

Los Angeles (Nov 20)   The U.S. dollar edged lower Wednesday following remarks from the head of the Federal Reserve emphasizing plans to continue ultra-loose policy, while the market looked ahead to data due later in the day.

The ICE dollar index (DXY) , which tracks the greenback against six rivals, eased to 80.601 midday Wednesday in East Asia, down from 80.709 late Tuesday in North America. Likewise, the WSJ Dollar Index fell to 73.07 from 73.15.

"FX was largely directionless, with most players happy on the sidelines ahead of today's big U.S. data day. ... At the margin, the U.S. dollar is a touch softer, prompted by [Federal Reserve Chairman Ben] Bernanke's comments," wrote RBC Capital Markets senior currency strategist Sue Trinh.

Bernanke's remarks late Tuesday included a forecast that the Fed would keep its policy interest rate near zero well after the unemployment rate falls to 6.5%, the level previously tipped as prerequisite for tightening policy. While Bernanke is due to leave office early next year, his designated successor Janet Yellen is widely seen as likely to maintain the Fed's current stance.

As for when the Fed would begin slowing, or tapering, the pace of its stimulative bond purchases, Bernanke offered no new guidance.

"Ultimately, Bernanke didn't give much away as to the likely start of tapering -- if the economy evolves as per forecasts, the [Fed's policy board] will likely begin to moderate the pace of purchases. So back to data watching we go," Trinh wrote.

While the release of minutes from the latest Fed policy meeting, due out at 2 p.m. U.S. Eastern time, could offer clues as to the taper's timing, the day ahead also included some key data.

U.S. retail sales for October were slated for release at 8:30 a.m. Eastern, with economists polled by MarketWatch expecting a flat result, while October consumer price data, scheduled for the same time, were forecast to rise 0.2%.

At 10 a.m., existing-home-sales numbers were due out, with the consensus tipping a drop to 5.1 million from 5.29 million in September. (See MarketWatch's economic preview here.)

Most of the major currency pairs saw little movement ahead of the data and Fed minutes, with the euro (EURUSD) buying $1.3550 compared to $1.3528 late Tuesday, and the dollar trading at 100.01 Japanese yen (USDJPY) , down slightly from Yen100.20 but off the day's lows.

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