Weak dollar ahead Bernanke’s speech

The dollar DXY  traded at three-week low, down  07 % against a basket of six major currencies on Tuesday on expectations that that the Chairman of the US Federal Reserve (FED), Ben Bernanke, later today will reiterate FED’s lose monetary policies.  Bernanke is due to testify to Congress over the next two days.  The dollar has over the last 24 hours lost ground both to Euro and Japanese yen.  Euro/USD trades at 1.3141 and USD/JPY at 99,37.

Asian stocks gained in 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 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 trades 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. That wrong footed investors who 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 to “hawkish” not to talk down stocks.

Bernanke would once again be faced with a delicate balancing act between assuring  enduring central bank support for the US 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 FED would start tapering, will strengthen the dollar and weakened global stock markets.

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