Dollar Near Highest Since 2006 on Bernanke Warnings, Jobs Data

March 4 (Bloomberg) -- The dollar traded near the highest level since April 2006 against six of the major currencies after Federal Reserve Chairman Ben S. Bernanke said policy makers may need to expand aid to the banking system.

The U.S. currency may climb for a fifth day against the euro before a private sector survey today that may show the U.S. lost jobs for a 13th straight month in February, boosting demand for the dollar as a shelter from the financial crisis. The yen traded near the weakest since November against the dollar after Bank of Japan Governor Masaaki Shirakawa yesterday said the Japanese economy is worsening faster than the central bank expected, reducing the appeal of Japan’s currency.

“Bernanke is telling the public that the Fed and the government will act to support the banking system, which is a support for the U.S. dollar,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, a unit of France’s Credit Agricole SA. “Stronger initiatives by the U.S. will be the driving force of currency markets.”

The dollar climbed to $1.2530 per euro as of 8:16 a.m. in Tokyo from $1.2561 late in New York yesterday. The yen was at 123.35 per euro from 123.31. The U.S. currency rose to 98.44 from 98.16 yen.

The Dollar Index, which the ICE uses to track the greenback versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, gained as much as 0.4 percent yesterday to 89.327, the highest level since April 2006, as investors took refuge in the world’s reserve currency.

‘Uncertainty’

“The dollar should continue to remain supported as the health of the financial system remains in doubt and investor uncertainty continues,’ Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut, wrote in a research note yesterday.

Policy makers may need to expand aid to the banking system beyond the $700 billion already approved and take other measures even at the cost of soaring fiscal deficits, Bernanke said yesterday in testimony prepared for the Senate Budget Committee.

“Without a reasonable degree of financial stability, a sustainable recovery will not occur,” Bernanke said yesterday in testimony prepared for the Senate Budget Committee. “Although progress has been made on the financial front since last fall, more needs to be done.”

Companies in the U.S. cut an estimated 630,000 jobs in February, economists surveyed by Bloomberg News predict the ADP Employer Services gauge will show today. U.S. pending home resales decreased 7.7 percent in January, more than twice the 3.5 percent drop forecast by economists, the National Association of Realtors reported yesterday in Washington.

“The worse things get, the better the dollar does,” said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. “The dollar is still the preferred safe haven in the currency market.”