Posted July 23, 2010
All eyes were on the Fed Reserve testimony on Wednesday. The dollar was bolstered by statements from chairman.
Chairman Testimony Changes Market
During the currency trading session on Wednesday, the US dollar improved as the Federal Reserve Chairman Ben Bernanke delivered his testimony to the US Congress. In this testimony, he said, an “unusually uncertain” economic outlook was present. This caused many investors to buy out of the euro, and other riskier currencies and back into the safety of the US dollar, something investors had been moving away from in the last few weeks.
During the day, the yen also saw a significant improvement after Bernanke’s statement. Investors also see the Japanese yen as a safer investment over the riskier euro. Investors are most concerned that the Federal Reserve will further loosen the monetary policy of the country to help respond to the slowing economic growth many believe is present in the US. This as many countries, including Canada, are now improving interest rates as economic growth continues to improve in those countries.
In this testimony to the Senate Banking Committee, Mr. Bernanke did not say that any changes to the current ultra low policies are likely, nor being considered. However, he did reaffirm that the Federal Reserve was prepared to take further action if it deemed it necessary to improve the country’s economy and ensure price stability in the marketplace.
By The Numbers
The currency market was dominated during the session by Mr. Bernanke’s comments. By the end of the trading session on Wednesday, the euro moved from US $1.2893 as of late Tuesday to US $1.2768. The euro moved from Y 112.73 to Y 111.11. The US dollar moved from Y 87.43 to 87.03. The US dollar fell from CHF 1.0524 to CHF 1.0503. The UK pound moved from US $1.5282 to US $1.5170. The ICE Dollar Index moved the US dollar from 82.772 to 83.291 during the day. At the time of release of Mr. Bernanke’s testimony (which was prepared testimony) the index rates during the session.
US Economic Factors
The currency trading day continued to be balanced on the US and its economic throughout the session. Investors believe that the Federal Reserve chairman’s comments were more negative and not as promising as most would have expected or would have liked to hear.
Global Growth Dollars
Because of the lack of good news about the economic growth in the United States during the trading session on Wednesday, those currencies worldwide that are tied to economic growth did not fare well during the trading session. The Australian dollar and the Canadian dollar both fell during the trading day against the US dollar. Both fell by as much as 0.5 percent against the US dollar for the day.
During the trading session, the euro fell by as much as one percent during the day against the US dollar. This caused the common currency to lose heavily for the second day in a row against the US dollar. However, investors believe that if positive results from Friday’s bank stress tests in the euro zone go well, the euro could improve.