Forex - Dollar slips ahead of Fed's Bernanke Testimony

The dollar slipped against the euro and yen on Thursday ahead of testimony by Fed Chairman Ben Bernanke to the House Budget Committee which is expected to validate the risk of U.S. interest rate cuts already factored in to the market.

Bernanke is due to speak at 10 a.m. (1500 GMT) and investors have priced in at least a half-percentage-point cut in the benchmark U.S. rate this month, with some saying the Federal Reserve could cut rates by three quarters of a point.

Declines in the dollar after a sharp and unexpected fall in U.S. housing starts were short-lived as investors looked beyond housing to an unexpected 21,000 drop in workers filing initial claims for U.S. jobless benefits last week, suggesting some improvement in the labor market. For more see [ID:nN17481155].

"The housing data was bad but you had some counterbalancing because the jobless claims number was better than expected," said Michael Malpede, senior currency strategist at Man Global Research in Chicago. "I don't think anyone will make significant position adjustments until they see what Bernanke has to say ... They want to see just how dovish he may be."

The dollar was down 0.3 percent against the yen at 107.18 . The euro was up 0.1 percent against the dollar at 1.4678 .

The Commerce Department said housing starts fell 14.2 percent to an annual pace of 1.006 million in December, the lowest pace in 16 years. Economists were expecting a 1.140 million annual rate. (Reporting by Nick Olivari and Steven C. Johnson; Editing by James Dalgleish)