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US dollar rises to session high against the yen

NEW YORK - The U.S. dollar rose to a session high against the yen and trimmed losses against the euro on Tuesday 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 this year.

Bernanke told lawmakers that the shrinking economy was at further risk from mutually reinforcing cycle of weak growth and financial market strain.

”The fact that he is saying it may take two or three years for a full recovery,” said Dustin Reid, director of FX strategy at RBS Greenwich Capital Markets in Chicago. “That’s longer than some had anticipated and it’s longer than what the government has been saying. We are seeing stocks came off, Treasuries get a bid, and a safe haven bid is giving some support to the dollar.”

The dollar rose to a session peak of 96.59 yen, according to Reuters data, before retreating to 96.49, still up 2.1 percent on the day. The euro was last up 0.2 percent against the dollar at $1.2717, down from about $1.2745 before Bernanke’s comments.

Separately, U.S. consumer confidence plunged to another record low in February with expectations that already dire economic conditions will continue to weaken and the jobs market will further deteriorate.

The Conference Board, an industry group, said on Tuesday that its sentiment index fell to 25.0 from a downwardly revised 37.4 in January. The median forecast of economists polled by Reuters was for a reading of 35.5.

The February reading was a new all time low for the index, which began in 1967.