Dollar dips against euro, yen

LONDON (AFP) – The dollar extended losses against the euro and yen Tuesday on expectations that US interest rates will remain low for some time as the world's top economy struggles to recover, analysts said.

In morning European trade, the euro rose to 1.4853, from 1.4819 dollars late in New York on Monday, when it had struck a one-month low at 1.4756.

Against the Japanese currency on Tuesday, the dollar slid to 88.84 yen from 89.57 yen late on Monday.

The greenback continued to be pressured after US Federal Reserve Chairman Ben Bernanke signalled Monday that the US central bank will maintain its easy monetary policy to nurture a sustainable recovery and as inflation remains low.

"Bernanke appeared to hose down expectations for a nearer-term rate hike," noted NAB Capital strategist John Kyriakopoulos. The Fed funds rate currently stands at a range of between zero and 0.25 percent.

Speaking ahead of a rate decision meeting on December 15-16, Bernanke said the recovery faces "some formidable headwinds," particularly the weak jobs market and tight credit conditions.

The comments followed a better-than-expected US unemployment report last Friday that showed the pace of job losses was slowing.

However, "the positive impact on markets and adjustment to growth expectations following the US jobs report has given way to renewed concerns," said Calyon analyst Mitul Kotecha.

Investors were digesting news that Japan Tuesday agreed on a 274-billion-dollar stimulus package with over 80 billion dollars in spending to shore up an economy beset by deflation and a strong yen.

The new spending came as data showed loan growth in Japan continued to slow for the 11th straight month in November, adding further evidence that liquidity injections into banks are not spreading to the broader economy.

The central bank last week announced it would offer 10 trillion yen in three-month loans to financial institutions in a bid to boost demand and the flagging economy.

Meanwhile dealers also fretted over the financial health of Portugal and Greece.

Ratings agency Standard & Poor's on Monday downgraded its long-term credit assessments of the two countries to "negative," voicing pessimism on their capacity to strengthen their public finances and reduce debt.

In London on Tuesday, the euro was changing hands at 1.4853 dollars against 1.4819 dollars late on Monday, at 131.95 yen (132.75), 0.9089 pounds (0.9024) and 1.5109 Swiss francs (1.5118).

The dollar stood at 88.84 yen (89.57) and 1.0174 Swiss francs (1.0199).

The pound was at 1.6341 dollars (1.6420).

On the London Bullion Market, the price of gold rose to 1,162.60 dollars an ounce from 1,142.50 dollars late on Monday.