Dollar Loses Ground after Ben Bernanke’s Speech (AP) (11-01-2008)

NEW YORK (AP) -- The dollar retreated on Thursday following the statement in U.S. Federal Reserve Chairman Ben Bernanke’s speech promise to act aggressively to counter economic woes, which led traders to believe the Fed may cut interest rates.

So far, the Federal Reserve has cut rates three times to stave off the crisis threatening the economy as a result of the credit and housing woes, and Bernanke said on Thursday that the Fed would "take substantive additional action as needed to support growth."

Bernanke's statements were "a clear indication that the Fed will cut rates by at least half a (percentage) point," at its next meeting on Jan. 29 and 30, said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn.

More reports of weak economic data in the U.S. in the next two weeks could drive the Fed to cut rates by up to 1 percent, to 3.25 percent, Gilmore said.

The euro rose to buy $1.4793 in late New York trading, sharply above the $1.4663 it was worth Wednesday also because the ECB decided to maintain its benchmark interest rate at 4 percent, while Jean-Claude Trichet’s comments indicated to traders that future rate hikes were forthcoming later this year. It is generally believed that the Central bank would have hiked rates already, had it not been for the credit crunch, as the ECB is facing sliding business and consumer confidence in the euro zone, as well as inflation estimated at 3.1 percent, well above its guideline of just under 2%.

The British pound edged up to $1.9609 as the Bank of England kept its key interest rate at 5.5 percent. That was up from the $1.9572 it was worth Wednesday.

The pound has been suffering from worries about Britain's housing market, trading around nine-month lows against the dollar and record lows against the euro.

The Bank of England is expected to cut its benchmark interest rate in February, as it did in December, said Gilmore, so Thursday's inaction did not do much to prop up the pound.

The dollar was up to 109.54 Japanese yen from 109.47 yen, however, tracking the rebound in U.S. stocks following reports that Bank of America Corp. may buy struggling mortgage lender Countrywide Financial Corp.

In other New York trading, the dollar fell to 1.1045 Swiss francs from 1.1144 Swiss francs Wednesday, and fell to 1.0108 Canadian dollars from 1.1144.

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