FOREX-Dollar near 1-month low, hurt by dovish Fed

01:54 |


* Bernanke's comments seen keeping alive QE3 hopes
* Dollar index stuck near previous day's 1-month low
* Debt worries mean euro gains seen limited
LONDON, March 27 (Reuters) - The dollar stayed near a one-month low against a currency basket on Tuesday after Federal Reserve Chairman Ben Bernanke kept the door open for more monetary easing, though debt worries left the euro struggling to extend gains versus the U.S. currency.
Analysts said the dollar could suffer further in the short term if speculation grows about the prospect of another bout of quantitative easing in the United States.
But if U.S. data continues to point to an economic recovery these concerns may ease, leaving scope for the dollar to push higher again. U.S. consumer confidence figures at 1400 GMT will therefore be closely watched.
The dollar index was at 79.022, stuck near a low of 78.870 hit on Monday as Bernanke said the policy of very low interest rates was needed to reduce unemployment, making it clear he was in no rush to reverse course.
"Bernanke's statement has left the dollar vulnerable. It will need some strong U.S. data to wipe out expectations of a new round of quantitative easing and over the next couple of weeks data will be crucial," said Niels Christensen, currency strategist at Nordea in Copenhagen.
"In the short term there could be more upside for euro/dollar but not much. I can't see a move above $1.35 being sustained given the situation in Europe."
The euro was down 0.1 percent at $1.3348, though it stayed close to a one-month high of $1.3368 on Monday on trading platform EBS. Further gains could see it target the late February highs around $1.3486 though analysts and traders said a move above $1.35 could be a tough hurdle.
The single currency faces near-term resistance at $1.3373, the 76.4 percent retracement of its late February to mid-March fall.
The euro drew support from Germany's signal on Monday that it was willing to increase the resources available to tackle the region's debt crisis, as well as by a better-than-expected German sentiment survey on Monday.
A meeting of European finance ministers at the end of the week, expected to discuss how to create a firewall big enough to protect Spain and Italy, may also offer markets some hope and aid the euro.
But worries remained that the crisis will continue to deepen in both those countries and Portugal. High borrowing costs in Spain were of particular concern before the government presents its budget on Friday.
YEN STEADIES AFTER DROP
A trader for a major Japanese bank in Singapore said moves in U.S. Treasuries could be key for the dollar at this juncture. If buying of Treasuries gains steam and bond yields fall in the wake of Monday's Bernanke's comments, the dollar could face more pressure.
But he added: "If the market's focus shifts to Spain, we could see a return to investors shunning risk and buying the dollar".
The dollar was steady against the yen at 82.82 yen, having pulled away from Friday's trough of 81.97.
There was talk of dollar buying by hedge funds as well as by Japanese importers, but also talk of dollar selling interest by Japanese exporters above 83.00. The yen has been vulnerable to selling since Japan announced monetary easing measures last month.
Japanese importers have also been steady dollar buyers over recent weeks as their purchases of fossil fuels have surged after most nuclear reactors in Japan went offline in the wake of the Fukushima disaster.
Elsewhere, the Australian dollar was steady at $1.0528, giving back some ground after rising about 0.7 percent on Monday but staying well above last week's two-month low of $1.0336.

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