* Fed Chairman Bernanke sees case for more policy easing
* Aussie dollar rises above parity for 1st time since 1983
* Euro retreats from 8-1/2 month high; dips below $1.40 (Updates prices, adds quote)
By Wanfeng Zhou
NEW YORK, Oct 15 (Reuters) - The U.S. dollar rose from a more than an 8-month low versus the euro on Friday as traders said its recent declines were overdone, but a sustained rebound seemed unlikely given expectations of further monetary easing.
The Australian dollar earlier surged above parity versus the U.S. currency for the first time since flotation in 1983 after Federal Reserve Chairman Ben Bernanke said there was cause for further policy easing given low inflation and high unemployment. See
Bernanke said policymakers were still weighing how aggressive they should be. See
Analysts said the dollar is likely to stay on the defensive until the central bank's meeting on Nov. 2-3. They said the downside may be limited as much of the impact from additional Fed easing has been priced in and bearish sentiment on the dollar has reached extreme levels.
"A lot of the QE (quantitative easing) story is already priced into the dollar valuation," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc in Washington. "The market is poised to take some profits ahead of the weekend after a very large move lower in the dollar."
The euro fell as low as $1.3985 on trading platform EBS and last traded at $1.4011, down 0.5 percent on the day. The euro had earlier climbed as high as $1.4161, the strongest level since Jan. 26.
Declines in some major U.S. stock indexes also hit investors risk appetite and provided some safe-haven demand for the dollar, analysts said.
Investors awaited a report from the U.S. Treasury Department later on Friday on the currency practices of other countries.
The U.S. administration faces a tough call on whether to label China a currency manipulator, a move that could throw a wrench in Sino-U.S. relations. (Editing by Andrew Hay)