* Dollar hits 3-month high against broadly weaker yen
* Bernanke warns U.S. economy remains at risk
* U.S. consumer confidence low but adds to dollar allure
(Recasts, adds comments, changes byline)
By Vivianne Rodrigues
NEW YORK, Feb 24 (Reuters) - The U.S. dollar touched a
three-month peak against the yen on Tuesday on mounting risk
aversion after U.S. Federal Reserve Chairman Ben Bernanke
warned that unless government efforts succeed in restoring
financial stability, the nation's recession may not end in 2009
and could drag into 2010.
Bernanke, in testimony to the Senate Banking Committee,
said the shrinking economy was at further risk from a mutually
reinforcing cycle of weak growth and financial market strain.
For more details see [][].
Bernanke was delivering the Federal Reserve's semi-annual
report on monetary policy.
The safe-haven bid for the U.S. currency was also fed by a
separate report showing U.S. consumer confidence plunged to
another record low in February, with expectations that reports
will show continuing weakness in economic conditions and
further deterioration of the jobs market. For more see
[].
"The price action on FX continues to play out in a
counter-intuitive way where weak U.S. data and commentary
continues to be bullish for the dollar," said Brian Dolan,
chief currency strategist at Forex.com in Bedminster, New
Jersey.
"The implication of a weaker economy in the States has
bigger and deeper implications across the globe. For now, the
dollar remains the ultimate destination for risk aversion".
In early afternoon trading in New York, the dollar rose to
a three-month high of 96.94 yen <JPY=>, according to Reuters
data, before retreating to 96.73, still up 2.4 percent on the
day. The euro had climbed to as high as 124.49 yen <EURJPY=>,
up more than 3 percent on the day..
Euro strength against the yen also helped buoy the single
currency versus the dollar. The euro was last up 1.2 percent
against the dollar at $1.2852 <EUR=>.
The Conference Board, an industry group, said on Tuesday
that its sentiment index on consumer confidence fell to 25.0
from a downwardly revised 37.4 in January. The February reading
was an all time low for the index, which began in 1967.
"We just got the worst consumer confidence number ever on
record," said Matt Esteve, foreign-exchange trader, Tempus
Consulting in Washington. "Investors remain risk averse and
that's going to benefit the dollar obviously."
Sterling was down 0.2 percent against the dollar at $1.4448
<GBP=>.
YEN TUMBLES
While the dollar was enjoying safe-haven status, investors
were giving up on the yen, prompting a sell-off across the
board in the Japanese currency.
The former linkage between a strong yen gaining on a
perceived safety bid as stock markets tumbled has been taken
over by worries about Japan's sharp economic downturn and as a
lack of convincing policy steps by Japan erodes confidence.
Japanese Finance Minister Kaoru Yosano on Tuesday said the
government was looking at stock buying and other methods to
support the share market. For more details see [].
The rally in the dollar versus the yen "has been
voracious," said Kathy Lien, director of currency research at
GFT Forex. But "the state of the U.S. economy is not driving
the dollar higher. Instead it is the expectation that if the
U.S. doesn't recover, no one else will."
Lien added USD/JPY could be headed to 98 in the short
term.
Sterling rose 1.8 percent to 139.45 yen <GBPJPY=> while the
Australian dollar <AUDJPY=> gained 2.6 percent to 62.21 yen,
according to Reuters data.
Traders are also still keeping an eye on developments in
the U.S. banking sector after a report on Monday that the
government could end up owning a stake of up to 40 percent in
Citigroup.
(Additional reporting by Nick Olivari)
(Editing by Theodore d'Afflisio)
