By Ron Harui and Paul Dobson Feb. 10 (Bloomberg) -- The dollar rose before the release of Federal Reserve Chairman Ben S. Bernanke’s testimony to Congress about withdrawing stimulus funds. The euro dropped as European nations weighed giving financial aid to Greece. The U.S. currency gained most against higher-yielding currencies such as the South African rand. The euro slid for the fourth time in five days versus the dollar as European Union leaders prepared to discuss measures to help Greece manage its budget deficit. The Australian and New Zealand dollars weakened after a report showed China’s exports and imports fell in January from the previous month. “Some of the dollar recovery is linked to Bernanke’s text about the Fed’s thinking on policy exiting,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London. “The Chinese data was much weaker than expected and markets are taking that as a warning signal.” The dollar strengthened to $1.3783 per euro as of 10:37 a.m. in London from $1.3797 in New York yesterday. The U.S. currency traded at 89.73 yen from 89.69 yen. The yen was at 123.71 per euro from 123.75, after earlier falling to 124.27, the lowest level since Feb. 4. Bernanke’s testimony, to be released at 10 a.m. in Washington, will detail the Fed’s plan to unwind emergency liquidity programs as the economy shows signs of recovery. He was originally scheduled to speak before the House Financial Services Committee. The hearing was postponed due to adverse weather 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 dollar has appreciated 3.9 percent against the euro this year on signs the U.S. economic recovery may outpace European nations and amid speculation growth in the euro zone will be hampered by the budget deficits of nations such as Greece, Portugal and Spain. European Union leaders will discuss Greece at a summit tomorrow in Brussels, an EU official told reporters today on condition of anonymity. German Finance Minister Wolfgang Schaeuble told lawmakers that options for helping Greece extended beyond loan guarantees, said an official who attended the briefing today at the Parliament in Berlin. Stagnating Economy “We don’t see any long-term positives for the euro even if we do get a bailout,” Simon Grose-Hodge, a strategist at LGT Group in Singapore, said today in a Bloomberg Television interview. “It’s going to come at the price of even greater austerity measures. The long-term prognosis is for stagnating growth in Europe.” The yen strengthened after China’s customs bureau reported exports declined a seasonally adjusted 5.5 percent last month from December, while 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.” The yen gained 0.2 percent to 78.66 per Australian dollar, and advanced 0.2 percent to 62.30 against New Zealand’s dollar. Australia’s dollar fell 0.1 percent to 87.75 U.S. cents, and New Zealand’s currency lost 0.1 percent to 69.52 cents. Interest Rates Benchmark interest rates of 3.75 percent in Australia and 2.5 percent in New Zealand compare with as low as zero in the U.S. and 0.1 percent in Japan, making the South Pacific nations’ assets attractive to investors seeking higher returns. The risk in such trades is that currency market moves will erase profits. The yen typically strengthens in times of financial turmoil as Japan’s trade surplus makes the currency attractive as it means the nation does not have to rely on overseas lenders. The dollar benefits as the world’s main reserve currency. The U.K. pound fell against the dollar after the Bank of England cut its forecast for Britain’s gross domestic product and said inflation will undershoot its 2 percent target. The annualized rate of economic growth will reach about 3.2 percent in the second quarter of 2011, compared with about 4 percent previously, the central bank’s predictions showed. Inflation will peak at about 3.3 percent before slowing as low as 0.9 percent and staying below the goal of 2 percent. The U.K. currency dropped to $1.5698, from $1.5719 yesterday, and traded at 87.89 pence per euro, from 87.77 pence. To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net

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