Dollar Rises to Two-Week High Versus Euro on Bernanke's Remarks

Ye Xie and Bo Nielsen
Bloomberg News
Tuesday, June 3, 2008

June 3 (Bloomberg) -- The dollar rose to a two-week high against the euro and increased versus the yen after Federal Reserve Chairman Ben S. Bernanke said the central bank is ``attentive'' to the implications of the currency's decline.

Traders interpreted the remarks as a sign that policy makers are done cutting interest rates as the weakened dollar causes the price of imports including crude oil to rise, sparking inflation. The U.S. currency has tumbled 9 percent against the euro and the yen since the Fed began cutting the target lending rate on Sept. 18.

``It could be a turning point for the dollar,'' said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon, the world's largest custodial bank, with more than $20 trillion in assets under administration. ``It's very unusual for a sitting Fed chairman to talk about the dollar explicitly.''

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The U.S. currency rose 0.5 percent to $1.5453 per euro at 11:45 a.m. in New York, compared with $1.5537 yesterday. It touched $1.5411, the highest level since May 14. The dollar increased 0.8 percent to 105.25 yen, from 104.43. The euro advanced 0.2 percent to 162.65 yen, from 162.26.

The dollar has increased 3.5 percent since touching the all-time low of $1.6019 per euro on April 22, as the Fed signaled it will stop cutting interest rates. It has arranged $39 billion of financing to facilitate the takeover of Bear Stearns Cos. by JPMorgan Chase & Co.

The U.S. Dollar Index traded on ICE futures in New York, which tracks the greenback against the currencies of six major trading partners, increased for a second day, touching 73.501, the highest since May 15. The index fell to 70.698 on March 17, the lowest since its inception in 1973.

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