TOKYO: The euro made limited gains against the dollar on Wednesday after Federal Reserve Chairman Ben Bernanke said the central bank is ready to support the US economy if needed, without being more specific.
More signals on the Fed chairman has in mind could come later in the session, when he addresses the House Financial Services Committee.
The euro seesawed overnight, initially dropping after Bernanke's testimony to the US Senate Banking Committee contained no explicit outline of stimulus steps. But the European unit then rose to session highs, and continued to push higher in Asian trade.
It was last at $1.2292, below Tuesday's one-week high of $1.2317 but well off a two-year low of $1.2162 hit last week.
Bernanke sounded a cautious tone, saying the Fed stands ready to offer more stimulus as needed but stopped short of signaling near-term action. He said the US recovery is being held back by Europe's debt crisis and uncertainty surrounding US fiscal policy.
"It's becoming really clear-cut that the US economy has slowed, admittedly on account of the euro zone, but the pace of the slowdown is clearly frightening the Fed. It's very clear that more easing is coming, and that's dollar-negative," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York.
In addition to a third round of large-scale bond purchases, known as quantitative easing or QE3, some strategists have suggested the Fed might follow the example of European Central Bank, which lowered the interest paid to banks on their excess reserves deposited with the central bank.
Wilkinson said said the Reserve Bank of Australia's release on Tuesday of minutes from its meeting in July gave good reason to hold on the Austrialian dollar.
"The Aussie, on the other hand, the RBA minutes yesterday suggested, 'no, no, no,' on further interest rate cuts, so you've got a reason to hold the Aussie even in light of a Chinese slowdown," Wilkinson said.
The minutes showed that central bank refrained from cutting interest rates at its July meeting after data showed the domestic economy had more momentum than first thought
The Aussie hit a session high of $1.0325, just shy of resistance at the July 5 high of $1.0330, and was last at $1.0296.
It also rose to a record high against the euro of A$1.1884 overnight, but came off slightly to A$1.1930 as the euro firmed against the greenback.
The euro rose off an overnight low of 78.27 pence versus sterling, its lowest since November 2008. It was last buying 78.49 pence.
Against the yen, the single currency edged up to 97.21 , off a six-week low of 96.17 yen touched on Monday.
The dollar bought 79.06 yen, moving away from a one-month low of 78.68 yen hit on Monday but likely to face pressure from selling by Japanese exporters on any move over the 80-yen level, with the July 5 high of 80.09 yen seen as a major resistance point.
Investors shrugged off minutes of the Bank of Japan's June 14-15 policy meeting released on Wednesday, at which some members said Japanese sentiment could suffer if Europe's debt problems led to a rise in the yen.
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