Dollar Dipped on Bernanke Testimony

The dollar fell modestly across the board as the Fed Chairman Ben Bernanke addressed ongoing housing problem in congressional testimony. The euro rose from around 1.3775 against the dollar to above 1.38 handle, while the sterling bounced back to near 2.0550.

Bernanke said housing will remain a drag on economic growth over coming quarters. The Fed expected housing foreclosures may get worse before improving. His comments increased market worries over the collapse of subprime mortgage sector and pushed the dollar lower.

With regard to inflation, Bernanke said the Fed is still very much concerned. He said recent inflation is clearly too high but core inflation should ease as commodity prices flatten. He added it is more difficult to maintain price stability if inflation expectations rise. The Fed is more likely to keep interest rates unchanged instead of cutting rates this year.