TOKYO (AFP) - The dollar rebounded from recent lows Thursday as upcoming testimony by the Federal Reserve chief and better than expected data offered a glimmer of hope on the troubled US economy, dealers said.
The euro was hit after a European Central Bank (ECB) official warned that growth in the 15-nation eurozone could be slower than expected, fanning anticipation that Europe too could see lower interest rates.
The greenback edged up to 106.98 yen in Tokyo afternoon trade from 106.71 in New York late Wednesday, recovering from its two-and-a-half-year low of 105.69 the previous day.
The single European currency fell to 1.4657 dollars from 1.4803 and to 156.83 yen from 157.72.
Market players said they would carefully monitor US Federal Reserve chairman Ben Bernanke's congressional testimony later in the day about the health of the world's largest economy.
US press reports said Bernanke has told lawmakers he supports congressional measures to stimulate the economy to reduce the chances of recession.
He may also give clues in his testimony about a Federal Reserve meeting at the end of the month. The market widely expects the Fed to slash rates for the fourth straight meeting, cutting the current 4.25 percent rate by a hefty 50 basis points.
But analysts said they were changing their views that rates would remain stable or rise in the eurozone after ECB Governing Council Member Yves Mersch warned of "downside risks" in the region's economic activity.
Traders are "adjusting their positions on views that there could be rate cuts in the European Union amid fears that weaker US growth may be spreading to Europe," said Masaki Fukui, senior market economist at Mizuho Corporate Bank.
Meanwhile the US currency was supported by an industrial production index for December that was better than what most analysts had predicted.
"Investors breathed a sigh of relief after this data. However, overall the dollar remains pressured and will continue its downward trend amid lingering uncertainty over the US economy," Fukui said.
The US central bank on Wednesday also released its key Beige Book survey that said US economic momentum had moderated during the end of 2007, in part due to "subdued" retail sales.
"Despite data that was modestly better than expected, the US economy is expected to continue to worsen," said Yosuke Hosokawa, head of forex group at Chuo Mitsui Trust Bank.
In Japan, the government reported that industrial output fell 1.6 percent in November, just as initially estimated.
The dollar was higher in regional Asian trade.
It rose to 41.05 Philippine pesos from 40.68, to 946.25 South Korean won from 938.70, to 32.29 Taiwan dollars from 32.26 and to 9,449 Indonesian rupiah from 9,440.
The greenback also rose to 1.4310 Singapore dollars from 1.4274 and to 30.18 Thai baht from 29.74.
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