Dollar, stocks surge as bearish Bernanke reassures the markets THE besieged Australian dollar enjoyed some respite yesterday as US Federal Reserve chairman Ben Bernanke gave financial markets hope his signature bond buying program would continue until the middle of next year. Despite a weak jobs report at home, which showed Australia's official unemployment rate rose from 5.5 per cent to 5.7 per cent from May to June, the benchmark S&P/ASX 200 finished the day 1.3 per cent higher at 4966 and the local currency leapt more than US2c -- briefly trading above US93c -- thanks to Mr Bernanke's bearish press conference, which appeared to contradict Federal Open Markets Committee minutes released only hours earlier. "The minutes were pretty hawkish, suggesting that about half the Federal Open Markets Committee members was of the view that the US's $US85 billion ($92.2bn) -a-month program should finish by the end of the year," said Stephen Walters, chief economist at JPMorgan. Several members judged that a reduction in asset purchases would likely soon be warranted, the Fed minutes said, even canvassing a finish date sometime next year. "Markets had only been pondering when the program would start to taper off, let alone when it would finish," Mr Walters said, pointing to the subsequent, albeit brief, slump in the US dollar. "But the chairman's subsequent press conference a couple of hours later revealed he was of a much more bearish mindset, as he melded the 19 disparate views of his fellow committee members into a coherent and more dovish story," Mr Walters added. Most commentators believe the Fed chairman's own views would carry the day even if he was outnumbered on the 19 member FOMC. The euro surged almost US4c against the greenback, and global stocks pared back earlier losses. Matt Sherwood, head of investment research at Perpetual, said Mr Bernanke indicated in his press conference that the bond-buying program, which has bolstered stock prices and kept bond yields low, would continue until US unemployment dropped below 6.5 per cent. "Even if the US enjoys jobs growth of 200,000 a month, its unemployment rate -- currently 7.5 per cent -- will still only be 7 per cent at the end of the year," Mr Sherwood said. "Despite promising signs of a recovery, the US economy remains fundamentally weak, especially given the sequester," he added, referring to the US government's spending cuts to try to close its gaping budget deficit. Some analysts speculate that the Fed chairman is being deliberately bearish to stop US bond yields from rising in advance of the expected "tapering." The rise in Australia's unemployment comes at a crucial time, with financial markets evenly balanced on the question of whether the Reserve Bank will cut interest rates to a historic low of 2.5 per cent next month. Mr Sherwood said the local market required between 15,000 and 20,000 new jobs each month to keep the unemployment rate stable. "Jobs growth of only 10,000 adds to the case for further Reserve Bank rate cuts," he said. The mining boom has camouflaged weakness in the economy. The Australian dollar has averaged around US74c since financial deregulation, so while it's fallen about 12 per cent since April, the Reserve Bank would still think it was too high. Futures markets put the chance of a rate cut next month at 64 per cent.