Dollar rose sharply

Dollar rose sharply vs euro, yen after Fed Chairman Bernanke said USD's broad slide has led to an "unwelcome" rise in U.S. inflation; Bernanke's speech "is a clear suggestion that the Fed has shifted from viewing dollar weakness as helpful for growth to a point where the negatives associated with inflation have become more important," said Alan Ruskin, head of international currency for RBS Greenwich Capital in New York. Analysts say suggestion Fed will keep interest rates on hold also supportive for dollar, which rose almost 2 U.S. cents vs euro, more than 1 full yen from just before Fed chairman began speech; greenback lost some of its gains late trade as U.S. stocks continued to fall on credit market jitters; late in New York EUR/USD was at 1.5461 vs 1.5539 late Monday, but above intraday low of 1.5410; USD/JPY 105.16 vs 104.55, GBP/USD 1.9645 vs 1.9672, USD/CHF 1.0418 vs 1.0372, EUR/JPY 162.58 vs 162.49.

Stocks fell as banks and lenders weighed again with Dow finishing at lowest point since mid-April; fears about capital needs drove Lehman Brothers to levels not seen since depths of credit crisis. Lehman Brothers fell 9.5%; elsewhere, Tyson Foods fell 8% after a flock of 16,000 chickens tested positive for mild strain of avian flu at a plant Tyson owns. Dow off 0.8%, Nasdaq off 0.4%, Philly semicons down 0.4%. Treasurys rose for 3rd straight day as flight-to-quality bid persisted on renewed concerns about health of financial sector; 2-year yield off 7.7 bp at 2.43%, 10-year down 6.2 bp at 3.91%. Nymex July crude fell $3.45 to $124.31/bbl - 1st close below $125/bbl in over 2 weeks - on signs consumption is choking on record prices. Comex August gold fell $11.50 to $885.50/oz on higher dollar following Bernanke's comments.