(Repeats to fix tabulation of data after story)
(Corrects headline and first paragraph to show dollar falls to
record low against euro for a third straight day)
NEW YORK, Feb 28 (Reuters) - The dollar fell to a record
low against the euro for a third straight day on Thursday as
Federal Reserve Chairman Ben Bernanke did nothing in testimony
to the U.S. Senate to dispel expectations that U.S. interest
rates are headed lower.
The dollar weakened broadly and the key index which
measures it against a basket of currencies plunged to a record
low for the third straight day.
Federal Reserve Chairman Ben Bernanke on Thursday said
that the central bank is in a more difficult position now to
respond to a slowing economy than it was in 2001.
Bernanke signalled further rate cuts to avert a recession
during his Congressional testimony on Wednesday, making clear
that the U.S. central bank was more worried about risks to
growth than inflation.
Lower interest rates reduce the attractiveness of
dollar-denominated securities and lower demand for the dollars
to buy them.
"Bernanke has yet to make a remark that shows open concern
about dollar weakness," said Alan Ruskin, chief international
strategist at RBS Greenwich Capital in Greenwich, Connecticut
in a note to clients. "
Allowing it to drop "is a convenient alternative
transmission for the Fed to exert some expansionary influence."
Bernanke said, "We obviously watch the dollar very
carefully" but expressed no big concern about its drop.
Midway through the New York session, the euro was up 0.5
percent at $1.5202 <EUR=>, near the session high of $1.5206.
The dollar index, which tracks its performance against six
major currencies, was down 0.6 percent at 73.733 <.DXY>, just
above a record low of 73.723.
The dollar was down 1 percent against the yen at 105.35 yen
<JPY=> a five-week low.
The euro has surged almost 5 percent in roughly three weeks
and investors see plenty of scope for further gains.
"In the current environment, it seems that only a clear
worsening of market sentiment and a steep fall in equity
markets or surprisingly weak euro zone data could stop momentum
in euro/dollar," said Commerzbank in a note to clients.
The dollar has been under pressure since the Fed began
cutting rates, pushing benchmark overnight lending rates down
by 2.25 percentage points since mid-September to 3 percent,
which has made the euro more attractive because the ECB has
kept its main rate at 4 percent.
All 15 Wall Street dealers surveyed in a Reuters poll on
Wednesday expected a March rate cut and saw the Fed bringing
interest rates lower than previously thought. []
By contrast, the euro found support from comments by ECB
Governing Council member Axel Weber, who said on Wednesday that
market expectations for the European Central Bank to cut rates
failed to take into account the dangers of higher inflation.
A lower-than-expected U.S. fourth quarter gross domestic
product update and a surprisingly big jump in initial weekly
jobless claims added to concern about the economy and increased
the likelihood of rate cuts. For details, see [] and
[].
"Well, just when you think it can't get any worse, it
does," said Shaun Osborne, senior currency strategist at TD
Securities in Toronto. "We expected an upward revision on GDP
and didn't get it, but the concerns about the jobless claims
are even bigger because it looks like the labor market is
showing some pretty evident softening."
The dollar fell to a record low against the Swiss franc at
1.0499 <CHF=>. It last traded at 1.0502.
(Additional reporting by Steven C. Johnson in New York and
Veronica Brown in London)
(Reporting by Nick Olivari. Editing by Richard Satran)
