U.S. dollar ended this week on a rising edge against euro, pound and yen after Fed‘s Chairman Ben Bernanke joined Donald Kohn in his hinting the markets, that next interest rates cut will be most probably made during FOMC‘s December 11 meeting.
Bernanke spoke yesterday at the presentation of the Citizen of the Carolinas Award in Charlotte Chamber of Commerce, Charlotte, North Carolina. The main idea of his speech can be narrowed to the assumption that the inflation risks are overthrown by the increased indicators of economical growth slowdown. That must hint the market participants that the upward trend in interest rates policy has finally ended and now we’ll see some aggressive measures by FOMC to create better conditions for cheaper money.
Dollar’s reaction to such news from Federal Reserve was quite strange, especially considering that lower interest rates would increase carry trade positions against dollar. But after all, if Fed is doing the changes that will improve U.S. economy and fix the global bank liquidity crisis, then it will certainly should add confidence in the U.S. currency, and because stability attracts investing — both bonds and stocks purchases by foreigners will increase demand for dollar.
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