The U.S. currency gained after Bernanke said late yesterday that the central bank will ``strongly resist'' any waning of public confidence in stable prices. Canada's dollar erased losses as the Bank of Canada unexpectedly held rates at 3 percent to counter inflation.
The dollar rose to 107.13 yen, the highest since Feb. 27, before trading at 106.76 yen at 8:38 a.m. in New York, from 106.31 yesterday. Against the euro, the dollar climbed to $1.5511, from $1.5646. Japan's currency traded at 165.59 per euro from 166.33 yesterday.
The U.S. dollar climbed to 1.0293 94.64 cents per Australian dollar, the highest since May 16, before trading at 94.80 cents. Against the New Zealand dollar, the U.S. currency gained to 75.49 cents, near the strongest in a month. The British pound slid to $1.9563 from $1.9751 after data showed U.K. house prices dropped in May.
The Fed is ``aware'' that the weak dollar boosts inflation, Dallas Fed President Richard Fisher said in response to questions after a speech at the Council on Foreign Relations in New York today. He also said the financial turmoil is ``not as severe as people feared.''
A report today showed that the U.S. trade deficit widened in April as the surging cost of oil boosted imports to a record, overshadowing the biggest gain in exports in four years. The gap grew 7.8 percent to $60.9 billion the Commerce Department said.
Stocks and bonds dropped on concern the Fed is preparing to raise rates. The MSCI World Index fell 1 percent. Two-year U.S. Treasury yields rose 16 basis points to 2.87 percent. The yield advantage of a German two-year bund over a comparable Treasury has narrowed to 1.81 percent from 2.26 percent on June 6.
The dollar has fallen 11 percent against the euro and 7.2 percent versus the yen since September, when the Fed began to lower borrowing costs from 5.25 percent. U.S. Treasury Secretary Henry Paulson said yesterday in an interview with CNBC that he would ``never'' rule out intervention to prop up the dollar.
Finance ministers of the Group of Eight industrialized countries may consider joint action to deflate the price of oil and prop up the dollar at their meeting June 13-14 in Japan, said DBS Group Holdings Ltd. in a report to clients.
The greenback dropped 1.4 percent against the euro last week, the most since March, after Trichet said on June 5 that policy makers may raise borrowing costs in July to contain inflation and the U.S. Labor Department reported the next day that the jobless rate increased the most in May in more than two decades.