The dollar was able to find its footing on Tuesday, but not before adding to its significant recent lows against a variety of currencies. Another bout of risk appetite also put the dollar under pressure in early dealing, but after testimony from Fed Chair Ben Bernanke helped to slow the bulls on Wall Street, the dollar stabilized across the board.
Still, its been a brutal week for the dollar, particularly against commodities-linked currencies such as the loonie and aussie. Higher-yielders such as the euro have also had their way with the buck, which had been bolstered by its safe haven status during the throes of the financial crisis.
Bernanke told lawmakers that the economic decline may be slowing and that the housing market has shown signs of reaching a bottom.
However, the Fed chief warned that the labor market remains a possible source of concern, and that stabilization of the economy is still at a fragile stage.
Speaking before the Joint Economic Committee of the U.S. Congress, Bernanke said, The recent data...suggest that the pace of contraction may be slowing, and they include some tentative signs that final demand, especially demand by households, may be stabilizing.
Meanwhile, the Institute for Supply Management said its index of activity in the service sector rose to 43.7 in April from 40.8 in March, with a reading below 50 indicating a contraction in the sector. Economists had been expecting a more modest increase to a reading of 42.2.
The dollar steadied near 1.5100 against the sterling, having dropped to a 4-month low of 1.5162. For the past two weeks, the dollar has been marching lower, moving further away from a 23-year high of 1.3501, set earlier in 2009.
The dollar held its ground near 1.3320 against the euro, having tested yesterday's monthly low of 1.3436 in early dealing. While the buck has been on the defensive of late, overall the pair has been moving in a 10 cent range between 1.2800 and 1.3800 for almost the last two months.
Traders betting on a global recovery have driven commodities prices higher, boosting the value of resource-linked currencies. The dollar continued its major downtrend versus the loonie Tuesday, dropping to 1.1676, its lowest level since last November. Against the aussie, the dollar eased to an October low of 0.7478.
The dollar remained in a holding pattern near the century mark versus the yen.
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