Dollar Falls as Bernanke Unsure When Monetary Stimulus to Unwind

Dollar Falls as Bernanke Unsure When Monetary Stimulus to Unwind - Businessweek

April 27, 2011, 4:32 PM EDT

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By Allison Bennett

April 27 (Bloomberg) -- The dollar dropped to a 16-month low against the euro after Federal Reserve Chairman Ben S. Bernanke said in his first press conference after a policy decision that he’s unsure when monetary stimulus will unwind.

South Africa’s rand rallied against all of its most-traded counterparts after gold surged to a record as the greenback weakened. The dollar slid for a seventh consecutive day versus the euro as Bernanke said the central bank will likely continue reinvesting maturing debt after its $600 billion bond-buying program expires in June.

“His language does not provide enough to change the dollar’s downtrend,” said Jessica Hoversen, an analyst at the futures broker MF Global Holdings Ltd. in New York. “The Fed believes that accommodative policy is still necessary, long-run inflation expectations remain stable and growth fragile.”

The dollar depreciated 0.9 percent to $1.4783 versus the euro at 4:19 p.m. in New York, from $1.4644 yesterday, after touching $1.4795, the weakest level since December 2009. The U.S. currency pared its gain versus the yen, advancing 0.7 percent to 82.10 yen after earlier rising 1.5 percent. The euro advanced 1.6 percent to 121.35 yen, from 119.42.

The rand rose as much as 1.3 percent to 6.5876 versus the dollar. Gold futures advanced to a record $1,530.30 an ounce on speculation the Fed will be slow to raise borrowing costs, boosting the metal as an alternative to the dollar. Gold and platinum account for a fifth of South Africa’s exports.

Fed on Inflation

The U.S. currency dropped earlier against the euro after the Fed said in its statement that a pickup in inflation is likely to be temporary. Bernanke told reporters that the end of the Fed’s bond-buying program probably won’t have a “significant” effect on financial markets or the economy.

“Bernanke is very much staying to script,” Boris Schlossberg, director of research at the online currency trader GFT Forex in New York, said via e-mail. “The longer-term implications of the first press conference are that the Fed will remain stationary for the time being while the rest of the G-10 with the exception of Japan is moving toward a more tightening bias.”