2013.05.2205:13:28UTC+00Dollar continues to decline for its third day against Euro before Bernanke testimony

The dollar decline for a third day versus the euro before Federal Reserve Chairman Ben S. Bernanke addresses Congress amid concern he will disappoint expectations for a paring back of financial stimulus.

The greenback drop down yesterday after St. Louis Fed President James Bullard said the central bank should keep purchasing bonds and New York Fed President William Dudley stated that it had previously been overly optimistic about growth. The yen erased earlier declines versus the dollar after Bank of Japan policy makers retained their monetary-base target and their statement made no reference to rising bond yields.

“Bernanke isn’t hawkish, so I think he’s more likely to continue monetary easing,” said Takuya Kawabata, an analyst at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin-trading company. “The market will probably respond with dollar-selling to Bernanke’s remarks.”

The dollar gave up 0.1 percent to $1.2923 per euro at 12:37 p.m. in Tokyo after dropping 0.5 percent over the past two days. It was at 102.47 yen from 102.50 yesterday and after touching 103.31 on May 17, the best level since October 2008. The Japanese currency drift back 0.1 percent to 132.42 per euro.

The Fed is purchasing $85 billion a month in Treasury and mortgage debt to push down borrowing costs and trigger growth.

The purchases should be maintained because markets indicate they are developing monetary conditions and can be adjusted based on how the economy changes, Bullard said yesterday in prepared remarks in Frankfurt. He votes on the policy-setting Federal Open Market Committee this year.

Dudley Undecided

New York Fed President Dudley said he hasn’t decided whether bond-buying should be increased or cut. The Fed is waiting for a self-reinforcing economy before it ends stimulus, he said. It was too optimistic about economic prospects in the 2009-2012 period, he said.

Bernanke testifies today to the Joint Economic Committee. The FOMC later in the day will release minutes of its last policy meeting.

“Those hoping for Bernanke to break the deadlock in the asset purchases debate will probably be disappointed,” analysts including Singapore-based Philip Wee, a senior currency economist at DBS Group Holdings Ltd, wrote in a note to clients. “The dollar may well have to return some of its gains discounting an imminent tapering.”

The dollar has climbed 4.8 percent this year, the best performance among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen has tumbled 13 percent and the euro advanced 2.4 percent.

No Alterations

The BOJ affirmed a plan to double the monetary base over two years at the end of its policy meeting. The central bank will expand the supply of money in the economy by 60 trillion yen ($585 billion) to 70 trillion yen a year, as pledged in April, it said today.

Japan’s exports missed estimates in April and the trade deficit swelled, data today showed.

Overseas shipments rose 3.8 percent from a year earlier, the Finance Ministry said, less than the median 5.4 percent estimate of economists surveyed by Bloomberg News. The trade shortfall widened to the largest in three months at 879.9 billion yen, compared with a forecast of 620.6 billion yen.