Euro plummets in New York

The euro fell sharply against the dollar while the yen rallied on Wednesday after Federal Reserve Chairman Ben Bernanke expressed concern about the US economy and dampened risk appetite. Bernanke, in testimony prepared for delivery to the Senate Banking Committee, said the US economy faces "unusually uncertain" prospects and the central bank was ready to take further steps to bolster growth if needed.
The comments pushed the euro down more than 1 percent versus both the dollar and yen as worries about the health of the global economy spurred investors into the safe-haven US and Japanese currencies. "The market was looking for some form of concrete action from Bernanke, a commitment to do something. All we got was that they're aware of the risks and are prepared to take as yet unspecified actions," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.
In late New York trading, the euro was down 1 percent at $1.2763, after having fallen as low as $1.2732, according to electronic trading platform EBS. Against the yen, the euro fell 1.5 percent to 111.07. The dollar fell 0.6 percent to 87.02 yen. The Japanese currency also surged versus sterling and the Australian and New Zealand dollars.
"If there is a theme to Mr Bernanke's testimony today it is uncertainty, over the state of the economy and the likely path of Fed policy," said Ian Shepherdson, chief US economist at High Frequency Economics in Valhalla, New York.
Tepid demand at a Portuguese debt sale also weighed on the euro as it heightened fears about Europe's banks days before the European Union was due to reveal which ones need to raise more capital. The euro had a good run against the dollar in recent weeks, rising to a 10-week high above $1.30 on Tuesday as traders began to bet most of the 91 European banks being examined would pass their stress tests. The test results are to be released on Friday.
European policy makers have expressed confidence their banks would pass the tests, though some analysts said investors remain sceptical about the severity of the health checks. UBS currency strategist Amelia Bourdeau said investors are starting to "lower their expectations" for the stress tests, thus hurting the euro.