* Bernanke-U.S. economy faces "unusually uncertain" time
* Dollar, yen rally as risk appetite fades
* Investors await euro zone banks' stress test results
(Updates prices, adds detail, comment, changes byline)
By Wanfeng Zhou
NEW YORK, July 21 (Reuters) - The euro fell sharply against
the dollar while the yen rallied on Wednesday after Federal
Reserve Chairman Ben Bernanke expressed concern about the U.S.
economy, dampening investors' appetite for risk.
Bernanke, in testimony prepared for delivery to the Senate
Banking Committee, said the U.S. economy faces "unusually
uncertain" prospects and that the central bank was ready to
take further steps to bolster growth if needed. For more, see
[]
The comments pushed the euro down more than 1 percent
versus both the dollar and yen as concern about the global
economic outlook spurred safe-haven flows into the U.S. and
Japanese currencies.
"The market was looking for some form of concrete action
from Bernanke, a commitment to do something. All we got was
that they're aware of the risks and are prepared to take as yet
unspecified actions," said Brian Dolan, chief currency
strategist at Forex.com in Bedminster, New Jersey.
"Reaction is basically turning into a spasm of despair," he
added. "In FX, the yen crosses are your real indicator of risk
aversion."
In afternoon New York trading, the euro was changing hands
at $1.2745 <EUR=>, down 1.1 percent. It had earlier fallen as
low as $1.2732, according to electronic trading platform EBS.
Against the yen, the euro fell 1.6 percent to 110.95
<EURJPY=>.
The dollar fell 0.5 percent to 87.06 yen <JPY=>. The yen
also surged versus sterling and the Australian and New Zealand
dollars.
"Bernanke is being more dovish than recent Fed commentary,"
said Omer Esiner, chief market analyst at Commonwealth Foreign
Exchange in Washington. "Bottom line: Additional monetary and
credit easing remains on the table."
Tepid demand at a Portuguese debt sale also weighed on the
euro as it heightened fears about Europe's banks days before
the European Union was due to reveal which ones need to raise
more capital.
The euro had a good run against the dollar in recent weeks,
rising to a 10-week high above $1.30 on Tuesday as traders
started betting most of the 91 European banks being examined
would pass their stress tests. The test results are to be
released on Friday. []
European policy makers have expressed confidence that their
banks would pass the stress tests, though some analysts said
investors remain skeptical about the severity of the tests.
UBS currency strategist Amelia Bourdeau said investors are
starting to "lower their expectations" for the stress tests,
thus hurting the euro. "Debt stress in the euro zone is not
going to disappear overnight," she said.
(Additional reporting by Steven C. Johnson and Vivianne
Rodrigues; Editing by Chizu Nomiyama)
