Tuesday, March 27, 2012

Dollar Weakness Continues

The dollar is weaker this morning as momentum from yesterday’s dovish comments from Fed Chairman Ben Bernanke continues.  Currently, the dollar index has fallen to 78.80 from close to 80.00 yesterday.  Overall, Forex traders view yesterday’s comments as pretty surprising as they were directed to a conference that was against the FED initiating another round of QE now.  In addition, with US economic news showing steady improvement, the timing of Bernanke’s remarks were surprising.  

Looking ahead for Forex traders, the question now is whether Bernanke’s statements have merit or are simply hot air.  It is worth pointing out that the FED chairman led the markets to believe that QE was imminent following the January FOMC Meeting.  However, the January remarks were then tempered as the US economy, specifically the job market, looked to be improving.

In any event, based on the dollar’s fall, Forex traders are definitely betting that Ben Bernanke’s words should be taken literally now.   For more on the dollar’s selloff from FX Street.

The greenback, measured by the US Dollar Index, is extending its negative momentum on Tuesday after yesterday’s sell-off on unusual and unexpected dovish comments by Chief Ben Bernanke.
Bernanke’s speech has aimed mainly at the sustainability of the labor market and he also casted doubts on the late improvement in the US economic fundamentals. Investors have interpreted the speech as a third round of QE is now more likely, boosting the risk-off trade.
At the moment: AUD +0.16%, EUR +0.11%, GBP +0.16%, NZD +0.33%, CAD -0.05%, CHF -0.10% and JPY -0.15%. Wall St. futures are up 0.06% at 13,285 pts. and S&P500 futures are advancing 0.07% at 1,422 pts. WTI is up 0.20 % at $107.29  Read More

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