Euro softens on reports that Weber’s out of running for top ECB job
By Deborah Levine and William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The dollar fell versus the euro but gained against the Japanese yen on Wednesday as traders awaited testimony by Federal Reserve Chairman Ben Bernanke.
Traders will especially listen to the question-and-answer portion, as this is Bernanke’s first appearance before Congress since Republicans gained a majority in the House of Representatives in the last election.
The dollar index (DXY 77.72, -0.28, -0.36%) , a measure tracking the U.S. unit against a basket of major rival currencies, stood at 77.781, down slightly from around 77.962 late Tuesday.
The euro (EURUSD 1.3701, +0.0074, +0.5432%) rose to $1.3673, up from $1.3634 in late North American trading Tuesday.
Against the yen, the dollar inched up to 82.47 yen (USDYEN 82.3500, -0.0100, -0.0121%) from ¥82.38 late Tuesday.
The British pound (GBPUSD 1.6086, +0.0016, +0.0996%) slipped to $1.6050 compared to $1.6071.
Bernanke’s testimony is scheduled to begin at 10 a.m. Eastern time.
“More interesting will be the Q&A session where Bernanke is likely to be grilled on the Fed’s latest round of QE [quantitative easing],” said Adam Cole, global head of FX strategy at RBC Capital Markets.
“Many senior Republicans are concerned about the long-term inflationary impact of the Fed’s asset purchases,” he said.
Bernanke’s prepared remarks are expected to resemble his speech last week and the Federal Open Market Committee’s latest policy statement.
Kathleen Brooks, research director at Forex.com, said that while Bernanke has emphasized weakness on the jobs front, markets have taken their cue from his comments on an improving growth outlook.
Bernanke’s speeches have tended since the end of August to coincide with the dollar appreciating rather than falling, she pointed out in a research note.
The dollar’s “increasingly showing signs that it is trading like a growth currency, and the market seems to be ruling out the prospect of further quantitative easing from the Federal Reserve,” Brooks wrote.
The next ECB president
Earlier, the euro dipped as low as $1.3609 after news reports said German Bundesbank President Axel Weber has dropped out of the running to succeed Jean-Claude Trichet as head of the European Central Bank. Trichet’s eight-year term ends in October. See more on European Central Bank.
Weber would likely have proven to be extremely hawkish on inflation and may have pushed for raising interest rates too soon for many of the union’s members still struggling, economists said. Still, the ECB will continue to be driven by its sole mandate on price stability, economists said.
The euro bounced back, however, as the Bundesbank issued a statement saying it “denies rumors concerning an impending statement on the professional future” of Weber.
Klaus Regling, the German head of the European Financial Stability Facility, is seen as a strong candidate for the post if Weber is unavailable, economists said.
Juergen Stark, a member of the ECB’s Governing Council, is another possibility, said strategists at Brown Brothers Harriman.
