February 14, 2006	Tuesday	Muharram 15, 1427

LONDON, Feb 13: The dollar was stable against the euro on Monday as markets braced for a busy week in the United States, in particular for new Federal Reserve chairman Ben Bernanke’s maiden testimony on monetary policy.

The euro traded for $1.1903 in late European deals, unchanged from its level in New York late on Friday.

The dollar dipped to 117.62 yen from 117.84 yen on Friday.

There was a growing belief that Bernanke would strike a hawkish tone, signalling more US rate hikes to come, dealers said. But with markets already pricing in a few more interest rate increases, the dollar was vulnerable too.

“With a fair amount of further tightening now priced in by interest rate markets, the dollar could be vulnerable if Bernanke seeks to send a more dovish message and emphasised risks to growth rather than signs of continued momentum and price pressures,” said Daniel Katzive at UBS.

“However, a more open-ended, data dependent message on future policy prospects consistent with the last Fed statement would leave the way clear for the dollar staying firm for now,” he added.

Analysts at CALYON believed the key Fed funds rate would hit 5.0 per cent from 4.50 per cent at present, and they contended that markets increasingly shared their view.

“With the Fed still concerned about the inflation threat from rising resource utilization rates in the labour and product market, Bernanke will likely endorse this view,” said Daragh Maher at CALYON.

Meanwhile, more strong US data was expected this week. The Philadelphia Fed consumer confidence index was expected to gain ground in a preliminary reading for January.

Elsewhere, the yen was also well-bid amid continued speculation about the possibility of policy tightening from the Bank of Japan.—AFP