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Asian Session – Dollar extends tumble after Bernanke holds onto stimulus
July 11, 2013 6:13 amVideo
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The dollar extended losses in the Asian session on Thursday after tumbling during late U.S. session trading on Wednesday following the Federal Reserve’s policy meeting minutes and the Fed President’s speech.
Fed Chief Ben Bernanke commented at an economics conference in Massachusetts that “highly accommodative monetary policy for the foreseeable future is what’s needed.”
His more dovish tone was in contrast to that of a few weeks ago when he signalled that the Fed will being tapering stimulus as soon as September. Now he stated that the jobs market needs to improve first before tapering.
Investors now reassessed their expectations of the Fed cutting back on bond buying soon and sold off the dollar. Such measures of asset purchases increase the supply of money and therefore tend to have a weakening effect on the currency.
The dollar dropped sharply against the euro, as EURUSD shot up to a high of $1.3205 in early Asian trading today, before steadying. This was the highest level since June 21, up from Tuesday’s three-month low of $1.2754.
GBPUSD also tracked higher to $1.5192, moving off further from a three year low of $1.4812 hit earlier this week.
The dollar also dipped against the yen, slipping to a two-week low of 98.25 yen. However the yen is expected to weaken in the longer term as the Bank of Japan implements bolder monetary easing measures.
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