Dollar rises on Bernanke comments

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The dollar rose 0.3 percent to 107.45 yen, recording its fourth day of gains versus the Japanese currency. Against the Swiss franc, the dollar gained 0.8 percent to 1.0343 francs, while sterling slid 0.3 percent to $1.9686.

Those gains were driven by the surge in U.S. stocks, where key indices climbed by more than one percent.

Bernanke said the Fed was considering several options, including extending the duration of the central bank's facilities for primary dealers beyond the end of the year should the current unusual circumstances persist in the dealer funding markets.

Markets expectations of tighter U.S. monetary policy by year-end were boosted by Federal Reserve Bank of Richmond President Jeffrey Lacker's comments that withdrawing some of the stimulus as risks to the economy diminished made eminent sense.

"He is implying the need to hike (rates) eventually to be on top of those inflation pressures. I will discount some of his comments because he is a not a voting member, but there was a reaction in the currency," said Upadhyaya.

Interest rate futures have fully priced in a 25 basis point hike in the fed funds rate by year-end. The benchmark overnight lending rate is currently at 2.00 percent after it was slashed by 3.25 percentage points since September.

Data on Tuesday showing a steep drop in the U.S. pending home sales index for May had only a brief but negative impact on the dollar, suggesting that the housing market is still far from recovery. (Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Gary Crosse)

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