The US dollar closed lower against almost all of the major currencies today after Federal Reserve Chairman Bern Bernanke hinted at the potential quantitative easing. Bernanke was speaking at the Jackson Hole Symposium today and traders have been waiting to him to give hints about the future actions of the Fed.
The Chairman was lamenting about the high unemployment level and the need to address it. He said that asset purchases (the policy known as quantitative easing) has worked in the past, and that comment was interpreted by analysts as a hint at QE in the near future. Bernanke said:
The costs of nontraditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant.
The truth is, such comments are not specific enough in terms of timing of central bank’s actions, disappointing some market participants. Basically, Bernanke just confirmed that he is in favor of QE, without specifying exact date or conditions for such a measure. Nevertheless, the dollar suffered after Bernanke’s speech.
EUR/USD was up from 1.2507 to 1.2574 and its daily high of 1.2637 was the highest since July 3. GBP/USD climbed from 1.5785 to the closing price of 11.5865, while the intraday maximum was at 1.5896. USD/JPY fell from 78.61 to 78.38, reaching 78.18 intraday — the lowest price since August 13.
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