The dollar posted new 18-month high against the euro after
yesterday U.S. Federal Reserve Chairman Ben S. Bernanke called for
further government stimulus measures to avert a prolonged recession.
The
greenback was also close to its strongest in a week versus the yen
after the White House said it may back such measures, having previously
withheld support for additions to a $168 billion package approved in
February. The Australian dollar declined after the central bank said it
saw a ``strong economic case'' for its Oct. 7 interest-rate reduction,
fueling speculation it may cut borrowing costs further.
``An
additional stimulus package will support the dollar,'' said Tsutomu
Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo.
``This show that U.S. officials are prepared to go far to limit damage
to the economy.''
U.S. Lawmakers should consider ``measures to
help improve access to credit by consumers, homebuyers, businesses and
other borrowers,'' Bernanke said in testimony to the House Budget
Committee yesterday. White House Press Secretary Dana Perino said
officials are ``open'' to the idea of a new plan.
Traders expect the
European Central Bank to lower borrowing costs further after cutting
the main refinancing rate by half a percentage point to 3.75 percent on
Oct. 8 as part of coordinated reductions by major central banks.
The
implied yield on the three-month Euribor contract expiring in March
fell to 3.41 percent yesterday, the lowest level in seven months. The
yield has been 0.23 percentage point higher than the benchmark rate on
average over the past year.
``Concerns over a European economic
downturn are intensifying,'' said Ryohei Muramatsu, manager of Group
Treasury Asia at Commerzbank AG in Tokyo. ``An ECB rate cut is
possible. The euro is becoming a very weak currency.''
The yen rose
against the euro and the New Zealand dollar on speculation other
central banks will follow the RBA by suggesting they will lower rates,
reducing the appeal of so- called carry trades.