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Dollar gains versus yen, Swiss franc after Bernanke

Analysts said the dollar would remain supported because Bernanke gave no firm commitment the central bank would provide additional easing, which could put downward pressure on interest rates.

The Fed also did not make clear what would prompt such measures, they noted.

“Net-net, all Bernanke said was expected. He didn’t change his position and stopped short of committing to another round of quantitative easing,” said Boris Schlossberg, a director of currency research at GFT Forex, in New York. “The major currencies will remain within the trading patterns they had established before his remarks: the yen is weakening and the dollar is somewhat supported against the euro.”

In midafternoon trading in New York, the dollar was up 1.1 percent against the yen at 85.35 yen after climbing as high as 85.49 yen, while the euro see-sawed but last traded up 0.1 percent at $1.2733 .

Comments from European Central Bank Governing Council member Axel Weber on Friday that Europe is on the brink of a self-sustaining recovery added to the euro’s allure.

The dollar hit a session high earlier against the Swiss franc at 1.0300 francs and last traded up 0.4 percent at 1.0277 francs.

The dollar got a lift earlier in the session after the government released its revision for second-quarter U.S. GDP growth, with figures that were slightly better than market expectations.

The GDP report helped push benchmark Treasury yields higher, boosting the return on U.S.-denominated assets. Government debt prices extended their earlier losses on Bernanke’s comments.

The Fed announced plans earlier this month to boost the flagging economy by reinvesting money from maturing mortgage bonds in government debt.

Yen wary

Meanwhile, traders trimmed long positions on the Japanese currency after a rally earlier this week pushed the yen to its highest level in 15 years and led Japan’s prime minister to reiterate a threat to take steps to stem its advance.

A media report that Prime Minister Naoto Kan was to hold a news conference sparked profit-taking in dollar/yen short positions, traders said.

Kan said he would take firm action on currencies when needed and that he would meet Bank of Japan Governor Masaaki Shirakawa when the central bank chief returns from an overseas trip.

Shirakawa traveled to Jackson Hole, Wyoming, for the Fed conference and will return to Tokyo on August 30.

Analysts and traders said Kan seemed to play down the prospect of imminent action but they remained wary with the currency so close to 15-year highs versus the dollar, with the rapidity of any move in the yen seen as key.

“I don’t think we’ll see intervention around current levels unless we get a disorderly move where dollar/yen falls sharply, say by three yen, during one day,” said Gavin Friend, currency strategist at nabCapital in London.

Despite the risk of possible action by Japanese authorities to curb yen strength, such as yen-selling intervention or monetary easing by the Bank of Japan, some traders and investors say the yen could still test a record high of 79.75 yen to the dollar, hit in April 1995.

A buy signal on the dollar against the yen was triggered on Friday when the 12- and 26-day moving average convergence divergence line rose above the 9-day signal line. The MACD was last at -0.67, with the signal line at -0.71.

The MACD is used in technical analysis as an indicator of short-term momentum by focusing on exponential moving averages and closing prices.