The dollar rose from a 14-month low against a basket of currencies on Friday after Federal Reserve Chairman Ben Bernanke said the U.S. central bank will be ready to tighten monetary policy as a recovery takes hold.
But the dollar fell versus the Canadian dollar, which hit a one-year high after data showed the Canadian economy added six times as many jobs as expected in September and also a surprising fall in that country's unemployment rate.
After taking a beating for much of the week, the U.S. currency also rebounded from a two-week low against the euro set on Thursday and pulled away from an 8-1/2-month low hit against the yen earlier in the week.
The Fed must continue to prop up the economy for an extended period but can't do so indefinitely for fear of an inflationary surge, Bernanke said on Thursday. Near-zero U.S. rates and the Fed's decision to pump hundreds of billions of dollars into the economy to fight recession have pressured the dollar recently. For more see [ID:nN08537898].
The mere fact that (Bernanke) mentioned tightening in his speech, especially given the fact it's towards the end of the week, provided some excuses to take profits on short dollar positions, said Vassili Serebriakov, currency strategist at Wells Fargo in New York.
The market has been running with the idea that the Fed is going to be on hold for a very long period of time, probably longer than a lot of other major central banks, he added.
In early New York trading, the ICE Futures U.S. dollar index , which tracks the greenback against a basket of currencies, was up 0.4 percent at 76.276, above Thursday's 14-month low of 75.767.
Jane Foley, research director at Forex.com in London, said Bernanke did little more than state the obvious in that the Fed would be ready to tighten policy when the economy improves to prevent the emergence of inflation.
She said while it is likely that the next Fed move will be a hike, this may not happen before the third quarter next year and so far the dollar's upside has been fairly limited.
Against the yen, the dollar was up 1 percent at 89.26 yen, on track for its biggest daily gain in two months. The dollar fell as low as 88.01 on electronic trading platform EBS on Wednesday, its weakest since January.
The euro slipped 0.5 percent to $1.4718, retreating from a two-week high around $1.4815 hit on Thursday.
European Central Bank President Jean-Claude Trichet said on Thursday U.S. support for a strong dollar was important and that excessive currency moves were unwelcome. [ID:nL8111212]
The Canadian dollar jumped to a one-year high after Statistics Canada reported net job gains of 30,600 in the month, compared with the consensus forecast of a 5,000 increase. The unemployment rate fell to 8.4 percent. [ID:nN09253705]
The U.S. dollar fell 0.5 percent to C$1.0465 after hitting as low as C$1.0426 , a one-year trough, according to Reuters data.
The figures may alleviate concerns that Canadian dollar strength is hurting industrial competitiveness, but the Bank of Canada will likely stay vigilant on the currency's movements, said Geoffrey Yu at UBS. (Additional reporting by Naomi Tajitsu and Jamie McGeever in London; Editing by James Dalgleish) ((firstname.lastname@example.org; Tel: +1 646 223 6304; Reuters Messaging: email@example.com)) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com
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