* Dollar supported by risk aversion, Bernanke awaited
* Weak U.S. consumer confidence weighs on sentiment
* Analysts: Dollar may fall on Bernanke testimony
(Adds detail, comment)
By Neal Armstrong
LONDON, Feb 24 (Reuters) - The dollar held broad gains
on Wednesday after weak U.S. consumer confidence data the
previous day limited risk appetite, and as investors braced for
testimony from Federal Reserve Chairman Ben Bernanke.
Currencies generally stuck to narrow ranges as few investors
were keen to take big positions before Bernanke begins his
Congressional testimony at 1500 GMT.
Investors will scrutinise Bernanke's comments for clues to
the Fed's interest rate outlook after the U.S. central bank last
week raised the rate at which it offers emergency loans to
banks, a move it insisted was technical.
Analysts said evidence the economy continues to struggle,
highlighted on Tuesday by a fall in consumer confidence to a
10-month low in February, supports the Fed's position that
interest rates will stay low, and that Bernanke would retain a
cautious stance.
"Confidence data yesterday showed the consumer is still
fragile and given weakness in the labour market, the Fed is
likely to be at pains not to choke off any recovery. I expect
Bernanke to reiterate that rates in the U.S. will stay low for
an extended period," said ING currency strategist Tom Levinson.
He added that questions to Bernanke would likely focus on
weakness in the labour market and that a cautious tone could
lead to slippage in the dollar index <.DXY> towards 80.50.
RBC analysts said in a note they expected Bernanke to say a
rise in the fed funds rate was a long way off.
"If so, we would expect this to weigh on (the dollar), lift
stocks and reverse the sharp moves seen through yesterday."
The euro edged up, but gains were limited as stock markets
struggled to break out of negative territory, keeping investors
largely averse to risk. Analysts said this was the main driver
of the market in Europe, keeping dollar losses minimal.
By 1220 GMT, the euro was 0.3 percent higher at $1.3550. The
single European currency was propped up as some traders further
trimmed short positions following broad weakness in past weeks.
The euro hovered near a nine-month low hit versus the dollar
last week, on the back foot after GfK data showed German
consumer sentiment was set to decline into March, following weak
business sentiment data on Tuesday. []
Concerns about Greece's public finances also kept the single
European currency vulnerable to more losses. A ratings downgrade
of Greece's four largest banks by Fitch on Tuesday reminded
investors of the financial woes facing the country.
European shares <> recovered back towards flat on the
day, after falling half a percent in early trade.
The dollar was slightly lower against a currency basket at
80.754, but stayed near an eight-month high of 81.342 hit late
last week.
AUSSIE RETREATS
The Australian dollar <AUD=D4>, often considered high-risk,
traded 0.1 percent lower against the U.S. dollar at $0.8888, off
a session low of $0.8857 hit on U.S. bank sales. The Aussie
retreated from a one-month high of $0.9072 hit on Wednesday.
Technical analysts said Tuesday's retreat signalled a
key-day reversal on the daily charts, highlighting potential for
further slippage.
It also slipped against the yen, which held gains after
rallying across the board on Tuesday on perceived safe-haven
demand. The dollar <JPY=> slipped 0.2 percent to 90.04 yen,
further retreating from climb above 92 yen last week.
(Additional reporting by Naomi Tajitsu; Editing by Nigel
Stephenson)
