The dollar rose Wednesday against most major currencies, resuming its two-month rally as Federal Reserve Chairman Ben Bernanke explained his plan for winding down government stimulus programs — including boosting interest rates on money the central bank holds for banks.

Higher interest rates, or the expectation of higher rates, can boost a currency as investors transfer funds to where they expect to earn higher returns. The U.S. has one of the lowest official interest rates of the major economies.

Bernanke said the Fed would “before long” start raising the rate it pays on banks’ excess reserves stored at the central bank. It currently is 0.25 percent.

The 16-nation euro, which had tilted higher this week on hopes for a solution to the Greek debt crisis from the European Union, slid again Wednesday.

The euro fell to $1.3736 in midday trading from $1.3775 late Tuesday in New York.

The euro has suffered recently from concern over the ability of Greece and, to a lesser extent, Portugal and Spain, to rein in their deficits. Last week, it fell as low as $1.3586, its weakest point since May 2009.

European Union leaders are set to issue a statement on Greece’s debt crisis during a summit Thursday, which European Central Bank president Jean-Claude Trichet is to attend.

Investors had hoped that Wednesday would bring a “concrete” plan for how to deal with Greece, said David Gilmore of Foreign Exchange Analytics in Essex, Conn.

But German officials said on Wednesday that there was no urgent need for a bailout.

“Skepticism remains rampant towards any rescue package,” said Ashraf Laidi, chief market strategist at CMC Markets in London.

In other trading Wednesday, the British pound slipped to $1.5589 from $1.5688. The dollar edged up to 89.90 Japanese yen from 89.63 yen and edged up to 1.0678 Swiss francs from 1.0656 francs.

The dollar also rose versus the New Zealand and Australian dollars, as well as the Brazilian real and Mexican peso.

However, the U.S. currency slipped to 1.0617 Canadian dollars from 1.0689 Canadian dollars. Hard money training.

Tags: bernanke, dollar rose, european central bank, european union leaders, Federal Reserve, stimulus programs

This entry was posted on Thursday, February 11th, 2010 at 12:15 am and is filed under Debt, Economic Turmoil, Global Economy, Global Financial, Global Recession, US Deficit, US Finance, US Inflation, World Financial, european economy. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.