Dollar Weak Ahead Of Bernanke’s Speech

The Dollar DXY has today traded at a three-week low, down 0.7% against a basket of six major currencies on expectations that U.S. Fed Chairman Ben Bernanke will later today will reiterate the Fed’s lose monetary policies. Bernanke is due to testify to Congress over the next two days. The dollar has lost ground both to the euro and Japanese Yen over the last 24 hours. The EUR/USD is trading at 1.3141, and the USD/JPY at 99.37.

Asian stocks gained in the morning trade. Hong Kong’s Hang Sheng index added 0.8 % and Seoul shares in South Korea were up 0.9 %. All the American indexes dipped slightly yesterday after continuous record breaking sessions. Intel was the winner while Coca Cola, Walt Disney and Boeing gave up around 1.5 %. Precious metals have stabilized. Gold was trading at USD 1291. Silver stays steady at USD 20 an ounce. There are small changes in commodities and oil. Brent crude is trading at USD 108 a barrel.

Bernanke’s comments last week concentrated on the need to keep a highly accommodative monetary policy for the foreseeable future. Wrong footed investors had bet on tapering in FED’s bond buying program as soon as September. That led to a sharp fall in the Dollar. Investors are, prior to today’s session, betting on that Bernanke might avoid being too “hawkish” so as not to talk down stocks.

Bernanke will once again be faced with the delicate balancing act between assuring and enduring Central Bank support for the U.S. economy, with a reminder that the ultra-easy policies cannot last forever. Bernanke set off a brief global sell-off when he outlined plans to reduce the bond-buying. This was balanced with a strong reiteration that the interest rates would be kept at the present low level. More firm indications as to when the FED will start tapering, will strengthen the dollar and weakeen global stock markets.