Dollar Strengthens After Bernanke Says U.S. Return to Recession Unlikely

The dollar rebounded from a three- week low against the yen after Federal Reserve Chairman Ben S. Bernanke said a return to a recession “doesn’t seem likely.”

The dollar advanced against 11 of its 16 major counterparts as a report this week is forecast to show U.S. initial jobless claims fell. The Australian and New Zealand dollars declined for the first time in four days as economists forecast both South Pacific nations’ central banks will keep interest rates unchanged during meetings this week.

“We see the overall U.S. economy is improving and hear that Bernanke may expand the bond purchase program,” said Koji Fukaya, chief currency strategist in Tokyo at Credit Suisse Group AG. “Those factors should support the dollar.”

The dollar rose to 82.84 yen as of 11:03 a.m. in Tokyo from 82.53 yen in New York on Dec. 3, the lowest since Nov. 15. The greenback gained to $1.3384 per euro from $1.3414. The euro was at 110.84 yen from 110.73 yen. It touched 111.19 yen on Dec. 2, the highest level since Nov. 29.

U.S. initial jobless claims fell to 425,000 last week from 436,000 the previous week, according to the median estimate of economists in a Bloomberg News survey before the data due Dec. 9.

Recession Unlikely

U.S. unemployment may take five years to fall to a normal level and Fed purchases of Treasury securities beyond the $600 billion announced last month are possible, Bernanke said, according to the transcript of an interview to air in the U.S. on Dec. 5 on CBS Corp.’s “60 Minutes” program.

The dollar climbed against all of its most-traded counterparts in November as optimism the Fed’s plan will spur growth outweighed concern it would debase the greenback.

Bernanke said a return to a recession “doesn’t seem likely” because sectors of the economy such as housing can’t become much more depressed. Still, a long period of high unemployment could damage confidence and is “the primary source of risk that we might have another slowdown in the economy.

Reserve Bank of Australia policy makers will leave their benchmark borrowing cost at 4.75 percent tomorrow and New Zealand’s central bank will hold rates at 3 percent on Dec. 9, according to separate Bloomberg surveys of economists.

“Kiwi and Aussie should drift lower into the rates decisions later this week,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Attention may shift back to Europe and the evolving sovereign- debt crisis there.”

Australia’s currency fell to 99.04 U.S. cents from 99.31 last week. It reached 99.39 cents on Dec. 3, the most since Nov. 22. The currency fetched 82.06 yen from 81.97.

New Zealand’s dollar declined 0.2 percent to 76.49 U.S. cents and traded at 63.36 yen from 63.22.

European Measures

Euro losses were limited on prospects Europe’s policymakers will set aside more money to bail out debt-stricken nations.

“European officials are taking one step after another to cope with the debt crisis, even though they are being reactive,” said Kazuya Yashiro, a currency analyst at Himawari Securities, Inc. in Tokyo. “The bias is for the euro to be bought back in the near term.”

Belgian Finance Minister Didier Reynders said officials will discuss the outlook for Portugal, which is struggling to quash speculation it will need a bailout.Reynders said the region could increase the size of its 750 billion-euro ($1 trillion) bailout fund.

“If we decide this in the next weeks or months, why not apply it immediately to the current facility?” he said Dec. 4.

The euro has dropped 9.1 percent this year, while the dollar is down 2 percent, according to Bloomberg Correlation- Weighted Currency Indices. The yen has advanced 12 percent.

To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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