* Fed Chairman Bernanke sees case for more policy easing
* Aussie dollar rises above parity for 1st time since 1983
* Euro retreats from 8-1/2-month high; dips below $1.40
(Updates prices, adds quote, details)
By Wanfeng Zhou
NEW YORK, Oct 15 (Reuters) - The U.S. dollar rose from a
more than eight-month low against the euro on Friday as traders
said its recent declines were overdone, but a sustained rebound
seemed unlikely given expectations of further monetary easing.
The Australian dollar <AUD=D4> earlier surged above parity
against the greenback for the first time since flotation in
1983 after Federal Reserve Chairman Ben Bernanke said there was
a case for more easing given low inflation and high
unemployment. It later retreated as profit-taking kicked in.
Analysts said the dollar is likely to stay on the defensive
until the Fed's Nov. 2-3 meeting. The downside may be limited,
however, as much of the impact from additional Fed asset
purchases has been priced into the market and bearish sentiment
on the dollar has reached extreme levels.
"The dollar is somewhat oversold against a number of its
key counterparts, but I don't really see much scope for
sustained dollar gains ahead of the Fed meeting in November,"
said Omer Esiner, chief market analyst at Commonwealth Foreign
Exchange Inc in Washington.
The euro fell as low as $1.3971 on trading platform EBS
<EUR=EBS> and last traded at $1.3986, down 0.65 percent on the
day. The euro had earlier climbed as high as $1.4161 -- its
strongest level since Jan. 26.
Upside targets for the euro include a late January high at
$1.4195 and then $1.4374, the 76.4 percent retracement of the
euro's slide from its November 2009 peak down to a trough hit
in June.
The dollar index <.DXY>, which tracks the greenback against
a basket of six currencies, was up 0.3 percent at 76.490, after
falling as low as 76.144, the weakest in 10 months.
Weakness in the U.S. currency pushed the Australian dollar
above the one-to-one level earlier on Friday for the first time
since the Aussie was floated in 1983. For details, see
[]
The Aussie dollar last traded at US$0.9872, down 0.71
percent.
RISK OF DISAPPOINTMENT
Bernanke gave no details on the central bank's next step
but said policymakers were still weighing how aggressive they
should be. He also suggested the Fed could indicate a
willingness to hold interest rates low for longer than
currently expected. []
"The crux of the issue now is how big ... the initial phase
of QE2 would be," said Mike Moran, senior currency strategist
at Standard Chartered in New York.
"The actual size could be open-ended. In that sense, I
think there is some risk of disappointment in terms of how much
information we're likely to get from the Fed when they do
announce the second round of QE," he added.
Analysts said the dollar could see a rebound if the Fed
announces asset purchases of less than $1 trillion or takes a
more gradual approach after its November meeting, which would
disappoint some market participants hoping for action to ease
concerns about a debasement of the dollar.
The dollar could also rise after the Fed meeting in a "sell
the rumor, buy the fact" reaction, traders said.
Declines in some major U.S. stock indexes also hit
investors risk appetite and provided some safe-haven demand for
the dollar, analysts said.
The dollar dipped 0.1 percent to 81.37 yen <JPY=>. It hit a
15-year low of 80.88 yen on Thursday, only about 1 yen above
its record low of 79.75 yen set in April 1995, keeping the
market nervous about the possibility of more Japanese
intervention following a first round in mid-September.
The U.S. Treasury Department has decided to delay a
much-anticipated report about whether to label China or any
other foreign country a currency manipulator, a Senate aide
said on Friday.
We are "hearing they will delay its release," the Senate
aide said, speaking on condition he not be identified.[]
The U.S. administration faces a tough call on whether to
label China a currency manipulator, a move that could throw a
wrench in Sino-U.S. relations.
