Dollar tumbles broadly

The dollar tumbled on Wednesday, posting its worst performance against a basket of currencies in almost a month, after Federal Reserve chief Ben Bernanke said the Fed could inject more stimulus to the US economy if it weakens further. The dollar also fell to a record low against the Swiss franc, in the wake of Bernanke's testimony.
The greenback hit a trough of 0.81820 franc, while the euro traded near $1.42, off the prior session's four-month low beneath $1.39 and on pace for its best day since April. Surprisingly strong Chinese growth data also helped overshadow worries about the eurozone debt crisis after Fitch Ratings said an ambitious Italian deficit reduction plan would help stabilise the country's credit rating. The euro held gains even after Fitch on Wednesday downgraded Greece deeper into junk territory, citing the absence of a new and fully funded financing program.
Bernanke, in testimony before a House of Representatives committee, said: "The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might re-emerge, implying a need for additional policy support."
In late afternoon trading, the ICE dollar index fell 0.8 percent to 75.208, its worst showing since mid-June. The euro rose and was last at $1.41460, up 1.2 percent, after touching $1.41930 on trading platform EBS. It rose 1.5 percent against the yen. The high-yielding, commodity-sensitive Australian and New Zealand dollars rose sharply, advancing 1.3 percent and 2.2 percent, respectively, versus the greenback.
In the options market, one-month risk reversals remained in favour of euro puts - options to sell the currency, with plenty of event risks ahead, including the results of stress tests on eurozone banks due on Friday. The 25-delta risk reversal on one-month euro/dollar was at -3.3 vols on Wednesday after falling to -3.8 on Tuesday. Reflecting that unease, the yen soared against the euro and hit its highest level against the dollar since Japan's March earthquake as investors unwound risky trades funded with yen. The dollar was last at 78.970 yen, up 0.3 percent, not far from a four-month low at 78.481 on EBS earlier in the global session.