NEW YORK: The US dollar fell to a three-month low against major currencies on Friday as investors waited to see if Federal Reserve Chairman Ben Bernanke will signal imminent monetary easing.
The euro climbed to an eight-week high against the dollar, helped by month-end flows and on expectations the European Central Bank will announce clear steps to tackle the euro zone debt crisis at its policy meeting next week.
Bernanke will likely acknowledge the Fed is actively considering another round of monetary easing in his keynote Jackson Hole speech at 10 a.m. (1400 GMT) But he could disappoint markets if he stops short of signaling another bond-buying program is imminent, which many analysts say is a strong possibility.
"There might be optimism expecting some QE coming our way and obviously that's weakened the dollar," said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank in New York. "It seems that the market is hoping for that."
The dollar index, which measures the dollar's value against a basket of currencies, fell 0.7 percent to 81.104, having hit a more than three-month low of 81.036.
Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York, said few traders expect Bernanke to telegraph his intentions, but "the key will be in the tone of his speech.
"If his assessment of US economic growth is bleak, speculators will likely bid up risk assets on the assumption that some sort of monetary stimulus is coming," he said.
The euro rose 0.9 percent to $1.2610, after rising as high as $1.2627, its strongest since early July, with traders noting buyers from the Middle East.
The ECB meets next Thursday and hopes of bond-buying have grown, although investors will likely wait to see whether the ECB provides enough details before buying euros aggressively.
France's member on the ECB executive board, Benoit Coeure, appeared to take a softer line than his German colleague on conditions for the central bank buying sovereign debt, saying on Friday that simply support of the EU's rescue funds would suffice.
German central bank chief Jens Weidmann's reported threat to resign has piled pressure on ECB President Mario Draghi to assuage his opposition to a new bond-buying plan.
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