* Dollar up vs yen as weak home data spark safety move
* Bernanke urges bold government action to fight crisis
* Euro erases earlier gains, ECB rate cut eyed
* BoC rate cut weighs on Canadian dollar
* RBA holds rates, sparking buying in Aussie
(Updates prices, adds detail, comment)
By Steven C. Johnson
NEW YORK, March 3 (Reuters) - The dollar rose against the
yen and euro on Tuesday as Federal Reserve Chairman Ben
Bernanke called for bold government action to pull the economy
out of recession, even if it means a surge in federal debt.
Bernanke's remarks to Congress heartened some investors who
are betting that proactive measures to fight the crisis will
help the United States become the first major economy to
recover. For details see, []
A report showing pending U.S. home sales falling to the
lowest level since the data series began in 2001 also dulled
risk appetite, causing Wall Street to surrender earlier gains
and prompting safe-haven flows into the dollar.
[].
"The pending home sales, which were worse than expected,
did help the dollar, as it just heightens the downturn and
increases the market's risk aversion," said Omer Esiner, senior
market analyst at Reusch International in Washington.
"Bernanke's comments, on the other hand, are positive for
the dollar in the short term because they suggest the
government is doing all it can to get us out of this crisis,"
he said. But he added that rising government debt will hurt the
dollar in the long run.
The euro fell 0.4 percent to $1.2539 <EUR=> after earlier
rising as high as $1.2677. The dollar rose 1 percent to 98.20
yen <JPY=> as worries about Japan's economy continued to weigh
on the Japanese currency.
Sterling fell 0.2 percent to $1.4014 <GBP=>, reversing
earlier gains that lifted it to $1.4157.
Wall Street stocks initially rose on Tuesday, reversing
some of the prior day's slide to levels last seen in 1997, but
they fell back into negative territory after Bernanke's remarks
and the U.S. housing data.
"It's really a simple equation right now: if equities go
down, buy the dollar; if they go up, buy other currencies,"
said Shaun Osborne, senior currency strategist at TD Securities
in Toronto.
Analysts said the market was also waiting to see if U.S.
Treasury Secretary Timothy Geithner sheds new light on plans to
shore up the financial system when he speaks to Congress later
on Tuesday.
CENTRAL BANKS IN FOCUS
The euro also suffered from expectations of an imminent
interest rate cut and worries about euro zone bank exposure to
struggling Eastern European economies.
The European Central Bank is seen cutting rates by half a
percentage point to an all-time low of 1.5 percent later this
week, and on Tuesday, ECB council member Christian Noyer said
policy-makers were considering all options, including
unconventional monetary policy. []
The Australian dollar remained the top performer after the
central bank left interest rates at 3.25 percent, saying fiscal
stimulus would keep a deeper recession at bay.
But it trimmed some of its early gains and was last up 1.4
percent at $0.6382 <AUD=> after hitting $0.6462 previously.
Other central banks were not as sanguine as Australia's.
The U.S. dollar rose 0.4 percent against its Canadian
counterpart to C$1.2950 <CAD=> after the Bank of Canada cut
rates to a record low and said it may turn to quantitative
easing.
The Bank of England is also seen bringing borrowing costs
to a record low of 0.5 percent with its own half-point cut, and
markets are on alert for the possible roll-out of alternative
monetary policy measures. []
