The dollar fell against the euro and the yen on Tuesday on expectations that Federal Reserve Chairman Ben Bernanke will reiterate in congressional testimony this week that US monetary policy will remain accommodative. But losses against the euro are likely to be limited after data showing an unexpected fall in German investor sentiment in July and subdued euro zone inflation added to expectations the European Central Bank also will keep rates low to aid economic recovery.
Bernanke is due to testify to Congress on Wednesday and Thursday and this could provide clarity on when the Fed will scale back its asset purchases. The dollar sold off in the second half of last week after he said highly accommodative monetary policy would be needed for the foreseeable future. The euro rose 0.6 percent to $1.3143, recovering from $1.3057 struck after the German ZEW sentiment survey. Resistance is seen around $1.3150, traders said.
The dollar lost 0.5 percent to 99.35 yen. The dollar index, which measures the greenback versus a basket of currencies, shed 0.5 percent to 82.631. The Australian dollar rose 1.5 percent to $0.9228 as market players trimmed bets on further interest rate cuts after the Reserve Bank of Australia said in the minutes of its July meeting that its current policy stance was appropriate.
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