Posts Tagged ‘USD’
Forex Trading – Bernanke… Got Buck’s Back
Tuesday, November 17th, 2009Bernanke… Got Buck’s Back
When the falling USD is in the headlines daily, gold at a record high and US Treasury having little luck in stabilizing the dollar (many still think this is something the Obama admin opposes in favor of a still weaker dollar), is it any wonder that Fed Chairman Bernanke has addressed the dollar and monetary policy and implied a risk to the economic forecast from continued depreciation in the dollar? In other words the dollar decline to date has unwound the safe haven rally of the second half of 2008 and hence is normal.
However, additional dollar depreciation (against floating developed economy currencies I add) is a threat to inflation and any significant change in the outlook for inflation (employment) could lead to a change in policy. Yes Bernanke said the USD is one factor among a number that the Fed sees impacting inflation but it is clear that currently it is the leading risk to inflation and inflation expectations (behind rising commodity prices too in part) albeit in a world with excess resource slack. So the motivation is not there yet for the Fed to move on inflation via a weak dollar channel. Nevertheless, the Fed is sensitive to the currency’s decline and it could in due course craft policy to address this source of inflation.
Forex Fundamental Analysis – G-20 Signals Green Light To Sell Dollar
Tuesday, November 10th, 2009G-20 Signals Green Light To Sell Dollar
The dollar plunged on Monday after G-20 finance ministers did not address the dollar slide and agreed to maintain the stimulus programs for the foreseeable future. UK Chancellor of the Exchequer Alistair Darling said the G-20 had decided to keep interest rates low and maintain record budget deficits until economic recoveries take hold.
Separately, the International Monetary Fund said the US currency may still be overvalued. Dollar carry trades returned while global stocks and commodities surged. Gold rose above $1,100 an ounce, a record high. Dow Jones 30 made a new yearly high. The S&P 500 rose 23.78 to 1,093.08. The yen, while little changed against the dollar, dropped versus other major currencies on improved risk sentiment. The euro rose to the 1.50 handle on stronger-than-expected German industrial production and improving EMU investor sentiment. Sterling gained for a sixth consecutive day. The Australian and Canadian dollars were supported by gains in risky asset prices. Canadian housing starts climbed to the highest level this year while Australian data were mixed.
