Dollar mixed after Bernanke derails rebound

ONDON (MarketWatch) -- The U.S. dollar held its ground versus the euro but slipped versus the Japanese yen Tuesday, holding within recent ranges a day after Federal Reserve Chairman Ben Bernanke appeared to derail expectations the central bank would hike interest rates as early as next year.

The dollar index /quotes/comstock/11j!i:dxy0 (DXY 75.89, +0.12, +0.16%) , a measure of the greenback against a trade-weighted basket of major currencies, was up 0.1% at 75.838.

The euro traded at $1.4789 versus the dollar, down from $1.4823 late Monday.

The euro slipped somewhat after data showed German industrial production unexpectedly fell 1.8% in October. Economists had expected a 1% monthly rise following a 3.1% jump in September.

Concerns about the periphery of the euro zone, particularly Greece, also undercut the currency, wrote strategists at Brown Brothers Harriman. Standard & Poor's on Monday placed Greece's A- sovereign debt rating on Creditwatch with negative implications.

A downgrade would make Greece the only nation in the 16-nation euro zone with a rating below A-.

The British pound tumbled 0.9% to $1.6309 versus the dollar. The euro rose 0.6% versus sterling to change hands at 90.67 pence.

Economists said a warning by credit-rating agency Moody's Investors Service that Great Britain and the United States could both test the "boundaries" of their Aaa sovereign rating put pressure on the pound. See story on the Moody's report.

The report categorized both countries as "resilient," but economists said it reignited the risk of an eventual downgrade.

Alan Clarke, economist at BNP Paribas, said the report bore some similarities to past warnings from Standard & Poor's and Fitch that the U.K.'s Aaa status won't be lost as long as the government moves to repair its public finances.

"However, this latest warning is more explicit," he said.

"This is a serious warning shot across the bows to both the current government and its possible future replacement," Clarke said. "The risk of a downgrade in the U.K. has been in the air for some time and on the back of this report, the risk is increasing."

The dollar fell against its Japanese counterpart to buy 88.57 yen, down from 89.47 yen in late North American trade on Monday.

On Monday in North American trading, Bernanke said a fragile economic recovery meant inflation was likely to remain "subdued," signaling the Fed wouldn't hike rates until far in the future.