Dollar Rises Against Euro as Bernanke Endorses U.S. Stimulus

By Ye Xie and Daniel Kruger

Oct. 20 (Bloomberg) -- The dollar rose against the euro for a fourth day as Federal Reserve Chairman Ben S. Bernanke endorsed consideration of a fiscal stimulus package.

The greenback rose against the South African rand and the Swiss franc on speculation U.S. government and central-bank efforts will help the world's largest economy recover from a recession before the rest of the world. The South Korean won strengthened versus the greenback as the government guaranteed $100 billion of lenders' foreign-currency debt.

``The U.S. is more actively taking measures to deal with the recession than others,'' said Jessica Hoversen, a currency analyst at MF Global Ltd. in Chicago. ``I am bullish on the dollar versus the euro.''

The dollar gained 0.6 percent to $1.3325 per euro at 10:49 a.m. in New York, from $1.3410 on Oct. 17. It touched $1.3259 on Oct. 10, the strongest since March 2007. The dollar traded at 101.77 yen, compared with 101.69. The yen climbed 0.4 percent to 135.63 per euro, from 136.21.

Interest-rate futures show a 100 percent chance the Fed will lower its 1.5 percent target lending rate by at least a quarter-percentage point when the central bank announces its next policy decision Oct. 29. That compares with no chance of a rate cut one month ago.

Bernanke's remarks in prepared testimony to the House Budget Committee today may give momentum to legislation being proposed by House Democrats. In January before the same panel, he said a stimulus ``could be helpful'' and urged lawmakers to act ``quickly.'' The impact of that $168 billion measure faded by July, and economists anticipate gross domestic product will contract in the current quarter.

India's Rupee

India's rupee fell as much as 0.3 percent to 49.0400 per dollar after the central bank unexpectedly cut its benchmark interest rate by 1 percentage point to 8 percent. It was the Reserve Bank of India's first rate cut since 2004.

The won rose 1.4 percent today to 1,315 per dollar after the Bank of Korea said it will provide $30 billion in U.S. dollars to banks to increase their access to funding as well as guaranteeing foreign-currency debt. On Oct. 16, South Korea's currency had its biggest decline since the International Monetary Fund bailed the nation out in 1997.

Developing-nation currencies tumbled after Lehman Brothers Holdings Inc. filed for bankruptcy on Sept. 15, deepening a freeze in credit markets and prompting investors to turn to the safest, dollar-denominated securities. Zurich-based UBS AG predicts the rupee will weaken 2.2 percent to a record low of 50 per dollar by March, adding to a 19 percent drop this year, while the won will depreciate 6 percent to 1,400, extending a 29 percent slump.

The Conference Board's index of U.S. leading economic indicators increased 0.3 percent in September after a 0.9 percent decline in the prior month that was almost twice as large as previously estimated, the New York-based private research group said today. The index points to the direction of the economy over the next three to six months.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net