SINGAPORE: The dollar clawed back lost ground against the euro in Asian trade on Tuesday on remarks by Fed chief Ben Bernanke that rising US inflation rates would not persist, analysts said. The euro bought $1.4204 in morning trade from $1.4220 in New York a day before. The single European currency had risen to a five-month high of $1.4268 in intraday trade on Monday. The euro changed hands at 119.75 yen from 119.67 a day earlier, while the dollar fetched 84.31 yen from 84.03 yen. Traders were buying the greenback after being reassured of the state of the US economy following comments made by Bernanke that a recent hike in US inflation rates would not last.
“Fed chairman Ben Bernanke affirmed that the Fed views inflation as transitory as long as the labour market is not strong enough to present second round effects,” DBS Bank said in a market commentary. The Fed chairman said a jump in US inflation rates for the month of February would be "transitory", adding that medium-term expectations "if anything, will be a bit low." US February inflation data released last month showed soaring consumer price levels across a large swathe of goods, with costs of staples jumping 0.5 percent, the fastest rise since June 2009. Bernanke's statement also hinted that he was committed to seeing through a $600 billion stimulus package expiring in June, going against fellow Federal Open Market Committee members' calls to cut it short and raise interest rates as the economy recovered.
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