* Investors scale back risk tolerance
* But market sentiment not necessarily negative
* Aussie off 5-week high, kiwi off 9-month high
By Kaori Kaneko
TOKYO, July 22 (Reuters) - The yen edged up against other
major currencies on Wednesday after Federal Reserve Chairman Ben
Bernanke offered a cautious view on the U.S. economy, reducing
investor risk appetite.
Renewed worries about CIT Group Inc <CIT.N> also made
investors wary and helped lift the yen, with the troubled U.S.
lender warning on Tuesday it could file for bankruptcy protection
if bondholders reject a debt restructuring. []
But market players said that while risk appetite had waned
somewhat the market was not necessarily becoming risk averse and
that currencies for the most part remained stuck in ranges, with
no decisive trend in sight.
"Market players remain cautious and they are unable to build
large positions," said Kwang-ja Kim, deputy general manager at
Shinsei Bank.
Bernanke, in testimony before the House Financial Services
Committee, said U.S. unemployment was likely to remain high into
2011, which he warned could undermine consumer confidence and
derail a recovery. []
U.S. Treasury prices rose sharply after Bernanke indicated
the economy was still too weak to tighten monetary policy any
time soon and traders said the fall in yields had weighed on the
dollar. []
"Bernanke's comments were appropriate. People had excessive
expectations for the exit strategy and it was an over-reaction to
flock to buy bonds," said a trader at a Japanese trust bank.
The dollar index <.DXY>, a gauge of its performance against
six major currencies, was steady at 78.957 after touching 78.591
on Tuesday and Wednesday, its lowest since June 3.
It fell to its lowest in seven weeks against the euro on
Tuesday at $1.4278 <EUR=>, close to its low for the year, but
recovered to $1.4203 by Wednesday.
Against the yen it eased 0.1 percent to 93.69 yen <JPY=>,
after shedding about 0.5 percent on Tuesday.
Bernanke speaks again on Wednesday, appearing before the
Senate Banking Committee at 1400 GMT.
"The currency market is trying to find a direction as there
is a mixture of positive and negative factors," said Ayako Sera,
a market strategist at Sumitomo Trust & Banking.
"There is relief about U.S. corporate earnings so far, but
there are still doubts about whether firms will be able to make a
sustained recovery," she said.
U.S. stocks rose on Tuesday on a solid profit from
Caterpillar Inc <CAT.N> but the gains were limited as some
investors paused following a recent earnings-fuelled run-up. []
Asian stocks rose but their gains were limited. []
The currency market took in its stride remarks from China
urging a responsible U.S. policy and a stable dollar.
China's Assistant Minister of Finance Zhu Guangyao said China
hoped the U.S. would conduct fiscal and monetary policy
responsibly and would gradually reduce its budget deficit.
[]
AUSTRALIAN INFLATION SLOWS, EURO, STERLING SLIP
The Australian dollar fell 0.2 percent to $0.8159 <AUD=D4>
after hitting five-week high of $0.8193 on Tuesday. Against the
yen it was down 0.1 percent at 76.42 yen <AUDJPY=R> after
touching a three-week high of 77.19 yen the previous day.
Australian consumer price inflation slowed to its lowest
annual pace in a decade last quarter. But measures of underlying
inflation favoured by the central bank showed price pressures
were proving more stubborn than many had hoped and reinforced
speculation Australia is done with cutting interest rates.
[]
The euro fell 0.3 percent from U.S. late trade on Tuesday to
133.02 yen <EURJPY=R>.
Sterling fell 0.3 percent to 153.64 yen <GBPJPY=R> and
slipped 0.3 percent to $1.6399 <GBP=D4>.
The New Zealand dollar slipped 0.2 percent to $0.6554
<NZD=D4> after rising to $0.6610 <NZD=D4> on Tuesday, its highest
since early October. It dipped 0.1 percent to 61.40 yen
<NZDJPY=R>.
(Additional reporting by Aiko Hayashi; Editing by Michael
Watson)
