Forex - Dollar firms on Bernanke testimony, Fed minutes

The dollar rose against most of its peers in U.S. trading on Wednesday after Federal Reserve Chairman Ben Bernanke's told Congress that loose monetary policies will stay in place for now though talk of their dismantling may come up soon.

In U.S. trading on Tuesday, EUR/USD was down 0.45% at 1.2848.

In prepared testimony, Bernanke told lawmakers earlier that ultra-loose monetary policy was providing "significant benefits" to economic recovery and reiterated that the bank’s asset-purchasing program will remain in place for now.

Bernanke added withdrawing monetary stimulus could threaten the country's economic recovery as well as price stability.

"A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further," Bernanke said in prepared remarks of his testimony. 

"Such outcomes tend to be associated with extended periods of lower, not higher, interest rates, as well as poor returns on other assets. Moreover, renewed economic weakness would pose its own risks to financial stability."

Stimulus measures currently in place, such as the Fed's monthly USD85 billion bond-buying program, weaken the greenback by flooding the economy full of liquidity to keep interest rates low and encourage investing and hiring.

However, the dollar saw demand after Bernanke said the U.S. central bank may discuss scaling back its stimulus measures "in the next few meetings" if the labor market makes noted improvements, which strengthened the U.S. dollar.

Separately, the Fed released the minutes of its latest monetary policy meeting on Wednesday revealing that several monetary authorities felt stimulus programs should begin unwinding in June.

Elsewhere Wednesday, National Association of Realtors reported that U.S. existing home sales rose 0.6% to 4.97 million units in April from March’s revised total of 4.94 million. 

Analysts were expecting U.S. existing home sales to rise 1.4% to 4.99 million units in April.

The greenback, meanwhile, was up against the pound, with GBP/USDtrading down 0.71% at 1.5044.

The Office for National Statistics said U.K. retail sales fell 1.3% in April from March, the largest fall in a year and defying market calls for a flat reading.

Retail sales rose 0.5% from a year earlier, well below expectations for a 2.0% increase.

Separately, the minutes of the Bank of England’s May meeting showed that three policymakers, including Governor Mervyn King, voted in favor of more easing this month, unchanged from April.

The dollar was up against the yen, with USD/JPY up 0.28% at 102.78, and up against the Swiss franc, with USD/CHF trading up 0.75% at 0.9774.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 1.04% at 1.0375, AUD/USD down 1.14% at 0.9694 and NZD/USD trading down 1.19% at 0.8073.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.49% at 84.33.
 
On Thursday, the U.S. is to release the weekly government report on initial jobless claims and official data on new home sales.