By Yoshiaki Nohara and Ron Harui Feb. 10 (Bloomberg) -- The dollar strengthened before Federal Reserve Chairman Ben S. Bernanke speaks to Congress about withdrawing stimulus funds and on speculation government reports will show the deficit narrowed and retail sales rose. The Australian and New Zealand dollars weakened against the U.S. currency after a Chinese report showed exports and imports fell in January from the previous month. The pound was near a three-week low against the euro on speculation the Bank of England will cut its economic-growth forecast in its quarterly report today. “Demand for the dollar will increase if Bernanke’s remarks indicate the U.S. is heading for the exit,” said Toshiya Yamauchi, manager of currency margin trading at Ueda Harlow Ltd. in Tokyo. The dollar advanced to $1.3754 per euro as of 1:53 p.m. in Tokyo from $1.3797 in New York yesterday. The U.S. currency traded at 89.72 yen from 89.69 yen. The yen rose to 123.40 per euro from 123.75, after earlier falling to 124.27, the lowest level since Feb. 4. Australia’s dollar fell 0.4 percent to 87.54 U.S. cents, and New Zealand’s currency 0.4 percent to 69.35 cents. The Dollar Index, which tracks the currency against those of six major U.S. trading partners, rose 0.2 percent to 79.939. Bernanke’s testimony on the Fed’s exit strategy will be released at 10 a.m. in Washington. He was originally scheduled to speak before the House Financial Services Committee on “Unwinding Emergency Federal Liquidity Programs and Implications for Economic Recovery.” The hearing was postponed due to snow and hasn’t been rescheduled. Trade Deficit The U.S. trade deficit shrank to $35.8 billion in December from $36.4 billion the prior month, according to a Bloomberg News survey of economists. Retail sales rose 0.3 percent in January, after a 0.3 percent decline in December, a separate Bloomberg survey showed. The Commerce Department will release the trade report today. The department tentatively postponed the release of the retail sales report until Feb. 12. The yen strengthened for the fourth time in five days against the euro after China’s customs bureau reported exports declined 5.5 percent last month from December, and imports dropped 0.9 percent. “Both exports and imports fell, which could be perceived as a bad sign for China’s economic growth,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole CIB in Tokyo. “This may cause risk aversion and buying of the yen and the dollar.” Bank of England The pound weakened against the dollar on speculation the Bank of England will lower its forecast of economic growth while raising its prediction for inflation. Gross domestic product in the U.K. rose 0.1 percent in the fourth quarter, the Office for National Statistics said last month. Consumer prices climbed 2.9 percent in December from a year earlier, the most since records began in 1997, according to government data. “The BOE is likely to express a dovish view on the economic outlook even though it may upgrade its inflation forecast,” said Akane Vallery Uchida, a currency strategist at Royal Bank of Scotland Group Plc in Tokyo. “This report is unlikely to alter the recent downward trend for the pound.” The U.K. currency declined to $1.5675 from $1.5719. The pound was 87.75 pence per euro from 87.77 pence yesterday, when it fell to 88.18 pence, the weakest level since Jan. 18. The euro earlier rose against the yen on prospects the European Union will help Greece stem its budget crisis. German Finance Minister Wolfgang Schaeuble plans to brief lawmakers today on steps he may take to support the Greek government before the European Union holds a summit tomorrow. “There was a suggestion from Germany in particular that they will come up with something to support Greece, and you’ve got a decent bounce in the euro,” said Phil Burke, chief dealer for global foreign exchange and rates at JPMorgan Chase in Sydney. “In Asia, currencies and equities will be supported on dips.” To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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