The euro bucked the general advance of riskier assets as investors reassessed a recent rally and nursed mounting concerns about the European stress tests, the results of which are due late Friday.
Discouraging results for an auction of Portuguese 12-month Treasury bills knocked the common currency lower in European trading. The bid-to-cover ratio, a gauge of demand for the T-bills, was 1.3, down sharply from 2.8 at the previous auction on April 7.
The average yield was 2.452%, more than double the yield at the previous auction.
The euro's slide after the Portuguese auction reminded investors of the fragility of the euro's recent advance, said analysts.
Currencies from nations with economies heavily linked to commodities generally strengthened, with the Canadian dollar and Norwegian krone leading the pack, but with the Australian dollar trading slightly heavy.
At midmorning in New York, the euro was at $1.2802, compared with $1.2893 late Tuesday. The common currency ticked as high as $1.2914 in overnight trading. The dollar weakened to 87.05 yen from 87.43 yen.
The euro was at 111.44 yen from 112.73 yen. The U.K. pound moved to $1.5216 from $1.5282. The dollar weakened to 1.0494 Swiss francs, from 1.0524 francs.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, rose to 82.982, from 82.772 late Tuesday.
In his testimony this afternoon, Mr. Bernanke likely will discuss the Fed's recent downward revision to its economic growth and inflation outlooks and the downside risks to the outlook, which include housing and economic conditions in Europe.
The Fed now expects the economy to expand 3% to 3.5% in 2010, down from the prior estimate of 3.2% to 3.7%. Fed posted a similar downgrade to its 2011 forecast while holding its 2012 prediction steady at a 3.5% to 4.5% rate.
Mr. Bernanke is expected to reiterate that rate increases aren't on the immediate horizon and that further stimulus measures remain a possibility if recovery stalls. "The big issue would be if he were to say something that suggests that they were imminently considering increasing quantitative easing. That would be very bad for the dollar," said Ron Leven, currency strategist at Morgan Stanley in New York.
The Canadian dollar strengthened to 1.0417 Canadian dollars from C$1.0450 late Tuesday, fueled by an upturn in crude-oil prices.
Oil futures got a lift from rising European equity markets, and prices could receive a further boost from a brewing tropical storm despite further evidence of weak U.S. oil fundamentals.
RBC Capital Markets said the Canadian dollar and the Norwegian krone were significant outperformers overnight in response to the strength in oil. "With the other commodity currencies and risk proxies remaining range-bound, CAD and NOK seem to be benefiting from firmer crude prices," RBC said.more information...
Source: http://europe.wsj.com/
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