Wednesday July 22, 10:17 PM
Dollar steady as economic optimism tempered
NEW YORK (AFP) - The dollar held in a narrow range against the other main currencies Wednesday in cautious trade amid mixed US corporate results and renewed concerns about prospects for the US economy.
The euro dipped slightly to 1.4219 dollars at 2100 GMT from 1.4227 late Tuesday in New York.
The dollar meanwhile was trading at 93.56 yen after 93.73 late Tuesday.
Sentiment was affected by an earnings report from US bank Morgan Stanley (NYSE: MS - news) , which revealed a worse-than-expected loss for shareholders of 1.25 billion dollars in the second quarter.
Reinforcing the dollar's appeal in a time of economic uncertainty was congressional testimony from Federal Reserve chairman Ben Bernanke, appearing before lawmakers for a second day.
Fred Rabb, analyst at PNC Bank, said trading was affected by "increased concern that the US economy will take longer than expected to recover."
He said Bernanke delivered a "sobering message" on the economy, suggesting that interest rates will need to remain at low levels for some time to support growth, with inflation pressures subdued.
"This lowered outlook for inflation can be attributed to the Fed's projection of a prolonged economic recovery and its view of financial markets as stressed," Rabb said. "These suggestions by the Fed encouraged risk aversion and have caused the dollar to strengthen."
Jon Gencher at BMO Capital Markets said traders have been unimpressed by generally strong US corporate earnings.
"By and large corporate earnings have been better than expected although there is the skeptical slant that would suggest that some of the results are impacted by the degree of stimulus that has been pumped into the system and can't go on forever," he said.
The euro was also under pressure from a report that factories in the 16 nations using the single currency saw demand fall in May compared with April, contrary to expectations.
New industrial orders fell by 0.2 percent in May, the European Union's Eurostat data agency said, bringing the drop over 12 months to 30.1 percent.
"The risks for the euro are now building," said analysts at BNP Paribas (Paris: FR0000131104 - news) .
In late New York trade, the dollar stood at 1.0654 Swiss francs from 1.0657 Tuesday.
The pound was at 1.6474 dollars after 1.6463.
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