Dollar Mostly Lower As Fed Official Says '2012'

TALI ARBEL

NEW YORK (AP) — The dollar mostly declined Wednesday, with the euro bumping up near $1.50 as a Federal Reserve official said in a speech that interest rates could possibly not rise until 2012 from their current record low near zero — if the Fed acts as it has before.

Lower interest rates can drive down the value of a currency as investors transfer funds in search of assets that yield higher returns. The Fed's current rock-bottom rate is weighing on the buck as traders use it borrow to buy up riskier assets, a market move called a "carry trade."

The market expects the Fed to start lifting rates around the middle or the second half of next year. In a speech to local business leaders Wednesday, St. Louis Fed President James Bullard said "the FOMC did not begin policy rate increases until 2.5 to 3 years after the end of the past two recessions," according to the St. Louis Fed's Web site. Assuming that the Fed acted similarly to how it acted in the past, that could mean that it wouldn't start increasing rates until 2012, he said.

Bullard is slated to be a member of the Federal Open Market Committee, the Fed committee that sets interest rates, next year. Membership rotates amongst the country's regional Fed presidents.

The 16-nation euro rose to $1.4973 in midday New York trading from $1.4855 late Tuesday in New York, despite more comments from European Central Bank President Jean-Claude Trichet supporting the dollar. Fed Chairman Ben Bernanke earlier this week noted the importance of a strong dollar.