Market News
May 22, 2013 @ 8:46 pm

Dollar gains after Bernanke announces stimulus stays

The dollar had a very volatile session on Wednesday in the New York trade after a testimony by the Federal Reserve Chairman Ben Bernanke.

The Fed Chief said that the currency loose monetary policy and stimulus measures will remain in place for now, though he did hint on some tapering eventually.

The Fed currently buys bonds worth $85 billion a month in order to stimulate the US economy. Such measures tend to weaken the US dollar since they flood the system with money.

Bernanke said withdrawing monetary stimulus could threaten the country’s economic recovery as well as price stability.

“A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further,” Bernanke said in prepared remarks of his testimony.

“Such outcomes tend to be associated with extended periods of lower, not higher, interest rates, as well as poor returns on other assets. Moreover, renewed economic weakness would pose its own risks to financial stability.”

In U.S. trading on Tuesday, EUR/USD was down 0.4 percent at $1.2848.
GBP/USD trading down 0.71% at 1.5044.
USD/JPY made a U-turn but is still up on the day, up 0.28 percent at 102.78

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