Forex - Dollar dips as market concludes U.S. policy to stay loose

The dollar softened against most major currencies on Friday after markets digested Federal Reserve Chairman Ben Bernanke's congressional testimony this week and concluded that monetary policy will remain accommodative even after the U.S. central bank wraps up stimulus tools.

Stimulus programs such as the Fed's USD85 billion monthly bond-buying program tend to weaken the dollar to spur recovery.

In U.S. trading on Friday, EUR/USD was up 0.23% at 1.3138.

The dollar hovered lower throughout the day after Federal Reserve Chairman Ben Bernanke told U.S. lawmakers in his semi-annual congressional testimony this week that monthly asset purchases will remain in place for the foreseeable future though they may begin to wind down later this year if the economy improves.

Bernanke stressed that an end to stimulus programs does not mean the Fed will quickly follow with tighter monetary policy such as hiking benchmark interest rates, which may remain at near zero even when the country's monthly unemployment rate approaches 6.5%, a level the U.S. central bank has said it would like to see.

While the dollar firmed in recent sessions on sentiments that stimulus programs are on their way out in a matter of months to about a year, the currency weakened on Friday on expectations that the Fed may even delay such a decision should economic data disappoint.

Meanwhile in Europe, official data showed that Germany's producer price index came in flat in June, defying expectations for a 0.1% contraction after a 0.3% decline the previous month. 

The greenback, meanwhile, was down against the pound, with GBP/USDtrading up 0.28% at 1.5268.

Public-sector net borrowing in the U.K. fell less than expected in June, declining to GBP10.2 billion from GBP12.8 billion the previous month. 

Analysts had expected public sector net borrowing to fall to GBP9.5 billion last month, and the numbers provided support for the pound a day after a separate data revealed that U.K. retail sales rose 0.2% in June from May and were up 2.2% from June of last year.

Monthly retail sales met analysts' expectations though the on-year numbers beat market calls for  a 1.7% increase.

The dollar was down against the yen, with USD/JPY down 0.15% at 100.27, and down against the Swiss franc, with USD/CHF trading down 0.38% at 0.9411.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.10% at 1.0368, AUD/USD up 0.24% at 0.9192 and NZD/USD trading up 0.49% at 0.7940.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.28% at 82.71.