* Dollar slides from more than 4-week high vs FX basket
* Bernanke dashes hopes about U.S. rate hike
* Dollar falls more than 1 percent vs yen
(Recasts, updates prices, adds quotes, Bernanke comments,
changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 7 (Reuters) - The dollar fell from four-week
highs on Monday as Federal Reserve Chairman Ben Bernanke doused
expectations the U.S. central bank would raise interest rates
anytime soon.
Bernanke said that while the U.S. economy has improved, the
recovery remains fragile and the unemployment rate could remain
high for some time. In remarks before the Economic Club of
Washington, he added that he still sees an "extended period" of
low rates. For his remarks, click on [].
"Bernanke is emphasizing the weakness and the downside to
the U.S. economy," said Brian Dolan, chief currency strategist,
at Forex.com in Bedminster, New Jersey. "Therefore, he's
postponing interest rate hike expectations. He left a very
clear impression that rates will remain on hold,"
Upbeat U.S. jobs data last Friday had fueled speculation
the Federal Reserve may consider winding down its stimulus
measures and start shifting to a tightening bias soon.
After Bernanke's statements, traders readjusted
their interest rate expectations and have squared up their
long dollar trades built since Friday.
In early afternoon trading, the ICE Futures' dollar index
<.DXY> fell 0.5 percent to 75.516 after earlier hitting a more
than four-week high at 76.183.
The euro <EUR=> edged up 0.1 percent to $1.4869 after
trading lower for most of the session. It rose as high as
$1.4883 following Bernanke's remarks. In earlier trade, it fell
to $1.4757, according to Reuters data, its weakest since Nov.
4.
Market participants said euro losses had been limited
anyway, as traders suspected stop-loss orders around $1.4750.
Some analysts said the slide in the single European currency
was providing a good opportunity to buy on dips.
The euro showed little reaction to news of an unexpected
fall in German manufacturing orders during October due to
weaker export demand, with analysts saying this was partially
offset by an upward revision to September's data.
[].
Euro investors also showed little reaction to comments from
European Central Bank President Jean-Claude Trichet, who said
the euro area economy is showing increasing signs of recovery.
[]. [].
Elsewhere the dollar was now down against the Swiss franc
<CHF=> at 1.0160, while sterling gained 0.1 percent to $1.6466
<GBP=>.
Despite its broad gains, the dollar was down 1.3 percent at
89.26 yen <JPY=> and remained well above a 14-year trough of
84.82 yen, marked in late November on trading platform EBS. The
euro was down 1.2 percent at 132.75 yen <EURJPY=>.
The yen's strength was mostly technical, analysts said,
after the dollar gained 2.5 percent against the yen on Friday.
Many in the market say the dollar's strong performance was
also due to massive unwinding of short dollar positions as the
year end nears.
Some analysts see further room for such unwinding after
speculators increased bets versus the dollar in the week ended
Dec. 1 to the most since at least June 2008, CFTC data showed
on Friday. []
(Additional reporting by Nick Olivari; Editing by Andrew
Hay)
