FED warns against excessive speculation

A stronger dollar weighed in on commodities across the board during Friday and Monday morning trades. USD has continued to strengthen towards the Japanese yen. After the break through of the critical 100 hurdle USD is trading at 101,90 yen a dollar. The weak yen is giving Japanese equities a strong boost while other Asian stocks are trading lower. Both oil and gold prices fluctuated wildly during Friday’s trade. EUR/USD trades at 1,2973.

Brent crude was down to USD 101 a barrel on Friday, but has recovered to 103.10. Gold which dipped to USD 1415, trades at 1431. The drop in commodities prices weighed on the Australian dollar which eased to a 11 month low of 0,991. The G-7 finance ministers meeting on Friday cemented the firmness of the dollar when Japan avoided criticism for its bold reflationary policies. “Abenomics”  has  led to a steady decline in the Japanese yen which improves exporters  earning prospects and underpins the export-reliant Japanese economy.

Japan as for years  been urged to revive its economy.  When Japan takes action few countries are  in a position to complain.  Other federal banks as the US Federal Reserve (FED) and Bank of England have as other central banks printed money as the Bank of Japan is doing now. The steep 25 % depreciation of the yen since last November is nevertheless creating nervousness about  to the health of financial markets and the global economy. Retail data from US and China to be presented later this week, are therefore going to be studies cautiously.

FED Chairman Ben Bernanke raised these concerns during a speech in Chicago late Friday. Bernanke warned against excessive risk-taking in financial markets in a hunt for profit.  Bernanke saw the strong drive in the dollar as the latest manifestation of a desperate global hunt for yield. Bernanke expressed worry that banks due to low interest rates and fall in bond prices, are  resorting to excessive speculation, highlighting the danger that easy monetary policy could create a new asset bubble with stock prices running  ahead of market fundamentals.

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