Bernanke Speech

August 27, 2010 by staff 

Bernanke Speech, NEW YORK, AP – The dollar zigzagged Friday after Federal Reserve Chairman Ben Bernanke will present the central bank would consider measures to boost a weakening economy, but the details are worth.

Bernanke said the Fed could consider a large-scale purchase of securities, public debt likely. Such a measure would take the lower interest rates, which could lead to higher U.S. spending, but they make dollar-denominated assets less attractive to investors.

The Fed chairman did not draw a specific course of action, but said the Fed would act if the economy deteriorated significantly and prices fell.

“He is open and willing to follow the way of quantitative easing if needed,” said Michael Woolfolk of the Bank of New York Mellon. “The impact of lower interest rates is coming home to roost.”

The dollar got an immediate rebound after Bernanke’s speech was made public, but returned most of the gains in subsequent operations.

The euro fell as low as 1.2677 and immediately after Bernanke began speaking, but recovered to 1.2763 and in midday trading, up from 1.2703 and Thursday night.

The dollar also fell against the currencies of countries that are major exporters of raw materials, which tend to rise when the investor sentiment improves. The Australian dollar, Canadian dollar and Brazilian real against the dollar all rose, as did the Scandinavian currencies.

The dollar held to gains against the Japanese yen, other currencies perceived as a safe haven for traders. It raised to 84.94 yen 84.60 yen a Japanese before the speech began. The dollar was worth 84.38 yen on Thursday.

The Fed chief also said the economy remains vulnerable to shocks, and the recovery of production and the labor market has fallen more than the Fed had expected. On Friday, the government said the economy grew at a rate of 1.6 percent, well below its previous estimate of 2.4 percent growth. Economists expected the review would be even higher, showing only 1.4 percent growth.

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