Dollar recovers in New York

The US dollar recovered from a 3-1/2-month low against a basket of other major currencies on Tuesday as the euro again failed to breach resistance at its 2011 high. Analysts expect the euro to stay supported ahead of Thursday's European Central Bank policy meeting, at which the ECB may signal a willingness to hike rates.
But after the currency peaked at $1.3855, investors found little incentive to push it higher. Trading was volatile. however, particularly after Federal Reserve chief Ben Bernanke offered no hint that the US central bank was considering tightening its loose monetary policy.
The dollar index, which tracks the greenback's performance against a basket of major currencies, fell to 76.735, its weakest level since early November, before recovering to 77.053, up 0.2 percent from the prior close. Most of the gains in the index came from declines in the euro. The euro was last down 0.2 percent at $1.3773, pushing nearly a cent below the one-month high of $1.3857 hit on trading platform EBS on Monday. The session low posted at $1.3762 on EBS, a clear break of support at the $1.3775 level, the 23.6 percent retracement of the euro's rise from the February 22 low to the February 28 high.
Traders reported stop losses above $1.3860, which is around euro/dollar's 2011 high set on February 2 and a break above which would mark the highest since early November. Further upside targets include $1.3948, around the 76.4 percent retracement of the euro's fall from November to January, and $1.3957, the 200-week moving average.
Bernanke's comments also weakened the euro against the dollar. In testimony before Congress, Bernanke said downside risks to US growth had diminished and said for the first time that the risk of deflation was now "negligible." Against the yen, the dollar rose 0.2 percent to 81.94 yen, with traders citing early heavy buying of dollar/yen by Japanese exporters. Against the Swiss franc, the dollar rose 0.1 percent to 0.9297.
Traders said uncertainties in the Middle East and North Africa remained high, and if tensions escalate, investors could again buy the Swiss franc and yen, the two currencies that have tended to benefit the most when risk aversion rises.
Sterling initially rallied to a 13-month high of $1.6330 against the dollar after stronger-than-expected UK housing data stoked expectations the Bank of England will raise interest rates before the Fed. Those gains eased in New York trading on general dollar strength. The Canadian dollar fell against the US currency after the Bank of Canada kept its main interest rate at 1 percent and gave no signal it plans to push the rate up soon. The greenback last traded up 0.3 percent against the loonie at C$0.9745, after falling to a three-year low of C$0.9684.