Greenback Steady As Bernanke Forecasts Low Rates

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The dollar held its ground on Wednesday even as Federal Reserve Chairman Ben Bernanke told Congress that lingering weakness in the jobs market and tame inflation would allow the central bank room to keep interest rates near zero for an extended period.

With no major competitors attracting much buying interest, the dollar stayed near its 9-month highs versus the euro and sterling while inching very slightly lower versus the yen.

Traders reacted to a slew of discouraging economic data that served to bolster the dollar's safe haven status.

US new home sales unexpectedly showed a substantial decrease in the month of January, with sales falling for the third consecutive month to reach a record low.

A report from the Commerce Department showed Wednesday that new home sales fell 11.2 percent to an annual rate of 309,000 in January.

Meanwhile, Germany's economic recovery ground to a halt in the final quarter of 2009, as weak private consumption and investment offset a spike in exports, figures released by the government showed.

German gross domestic product was flat in the three months through December period, the Federal Statistical Office said on Wednesday, confirming preliminary estimates. The stall in German growth follows two quarters of expansion in Europe's largest economy.

The dollar was steady near 1.3550 versus the euro, around a cent from last week's 9-month high of 1.3444.

At the same time, the dollar touched its highest level this week versus the sterling, rising to 1.5395. With the very modest advance, the dollar edged toward last week's 9-month high of 1.5342.

Fed Chair Bernanke told lawmakers today that slack in the labor markets and a flattening of oil prices will keep inflation subdued for some time. Bernanke stressed that current economic conditions and low inflation expectation will keep the target for the federal funds rate at near zero levels.

Bernanke also reiterated that the Fed's mortgage-backed securities purchases will be completed by the end of March as planned, though the central bank will continue to evaluate securities purchases as the economic outlook evolves.

(Market News Provided by RTTNews)