Dollar Pares Losses This Week After Bernanke’s Speech
The US dollar extended its decline this week on the outlook for another round of the quantitative easing by the Federal Reserve but it unexpectedly rebounded by the end of the week after the speech of the Chairman Ben Bernanke.
The dollar remained very weak on the outlook for the Fed to stimulate the US economy. The minutes of the Federal Open Market Committee supported this outlook. The unfavorable US macroeconomic fundamentals reinforced the prospects for the stimulus.
The Bernanke’s speech should to confirm the expectations of the easing. And in fact it did as Bernanke said: “the FOMC is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation over time to levels consistent with our mandate”. Yet instead of driving the dollar even lower it had completely opposite effect. Or was it just coincidence and the rebound of the dollar was just a correction? Or we’ve seen the beginning of the new trend? It’ll be interesting to see.
EUR/USD opened this week at 1.3980, fell as low as 1.3775, climbed as high as 1.4156 and closed at 1.3974. GBP/USD opened at 1.5929 and dropped to the weekly low of 1.5754, yet managed to rebound and closed at 1.5982. USD/JPY fell from 81.73 to 81.41.
If you have any questions, comments or opinions regarding the US Dollar, feel free to post them using the commentary form below.
Tags
Ben Bernanke, Dollar, EUR/USD, Federal Reserve, FOMC, GBP/USD, Stimulus, United States, USD/JPY
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Earlier News About the US Dollar:
- Dollar Head to 15-Year Low vs. Yen Before Bernanke Speaks (2010-10-15)
- Dollar Falls as Federal Reserve Signals About Easing (2010-10-13)
- Another Week of Dollar Weakness on Talks About Easing (2010-10-09)
- USD/JPY for First Time in 15 Years Below 82 on US Payrolls (2010-10-08)
- Dollar Reaches Eight-Month Low vs. Euro & Pound, Drops vs. Yen (2010-10-07)
7 Comments
I don’t understand why the USD fell. Was it because their was not enough details supplied by Bernanke or was it do to a correction of the market over buying the USD?
Quantitative Easing Round 2 seems to be the only viable reason for the EUR/USD to go up. If we go into the technical analysis, the 1.3890 level of resistance has now become a support level and the next probable stop is not far from the 100% Fibonacci retracement level of 1.5140. European exporters will cry bloody tears at those levels :(.
ok yeah. I’m sorry. I meant I can’t understand why the dollar gained after bernanke’s speech. Its obvious why the dollar has been fallen. Why did the dollar rise after bernanke spoke and do you think it will continue to gain this upcoming week?
It needed some correction and Bernanke’s speech was a good reason for that. I don’t think we’ll see an upward movement in USD next week.
Oh come on. The dollar is very oversold and due for a rally. It could get back over 80 on the index rather quickly actually. Where from there is hard to say. Some see bearish head and shoulder patters on the USD with downside targets in the index of something like 72 on one and 40 on another. Others point out that the USD is putting in higher lows. My guess is the USD will do fine, but my confidence on that guess is rather limited.
Yeah, I agree that EUR/USD is way overbought, but it’s overbought for quite a long time now. The rally we see is very irrational, but it looks like the market participants like it this way…
Hmmm, I think the USD rally is on with silver leading the charge down.