Bernanke breaks in the currency market to give wings to the dollar
Washington - June 3, 2008 - The chairman of the U.S. Federal Reserve (Fed), Ben Bernanke, may have marked a turning point today in the dollar to be concerned about the weakness of the ticket and green to make it clear that will take a break before returning to move rates. Will the hike to next time? The euro has hosted these words with a vertical drop. Bernanke is worried about the depreciation of the dollar and its inflationary implications.
The European currency traded at the moment around the 1.5456 dollars, but has suffered a significant drop from the top item on the floor at 1.5628 to 1.5413 after Bernanke speech.
"Today Bernanke has put a temporary roof for the euro at levels of 1.55 / 1.56 U.S. dollars," says Jose Luis Martinez, strategist at Citigroup. "This could be a turning point for the dollar," warns Michael Woolfolk, currency strategist for Bank of New York. "It's very unusual for a chairman of the Fed so explicit talk of the dollar," he adds.
The U.S. currency has appreciated by 3.5% since it hit its historic low at 1.6019 U.S. dollars per euro on April 22.
"The challenges that our economy faced during the last twelve months have generated a downward pressure on the dollar at the international level, which unfortunately has contributed to an increase in import prices and inflation in consumer prices," noted in his speech via satellite to the International Monetary Conference (IMC) which is being held in Barcelona.
Types stable at the moment
Bernanke has also defended today that the current monetary policy of the U.S. central bank is "well positioned" to promote a "moderate economic growth" and achieving price stability. The market has interpreted these words as a signal of the new institute issuer that U.S. rate cuts have been finished by the time the other side of Atlanta.
The Fed lowered interest rates by 25 basis points to 2% on 30 April. It was the seventh reduction of fees in a campaign that began on September 18, when the restriction of credit began to put pressure on markets. The institution chaired by Bernanke has since lowered the price of money at 3.25 percentage points in order to cope with the crisis in financial markets and their effects on economic growth.
The Fed will again gather next Thursday, could not seem to opt for a further cut in the price of money. The market is currently 98% a possibility that the agency kept prices stable money in this event and also gives virtually assume that will do the same in five August and September 16.
And later? Future on the Fed Funds have come to insinuate a 56% probability of a rate hike to 2.25% in its meeting of 29 analysts criticize octubre.Cada again that the excessive aggressiveness of Bernanke lowering rates has weakened the dollar and has fueled the boom of raw materials. And even the most moderate believe that the Fed will eventually raise rates in December. Only a recession could change this terrifying scenario.
Source: El Economista