The US dollar traded sideways today as risk aversion caused by the Italian election was trimmed by positive US macroeconomic data and comments of Federal Reserve Chairman Ben Bernanke, who defended the monetary stimulus.
Forex market participants were worrying after the last week’s Fed’s minutes that the central bank will drop the stimulus program. Bernanke eased such worries yesterday, saying:
We do not see the potential costs of the increased risk- taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery. Inflation is currently subdued, and inflation expectations appear well anchored.
The indecisive outcome of the Italian election resulted in the risk aversion sentiment on the FX market. At the same time, all yesterday’s US macroeconomic reports were good, reducing fear among traders.
EUR/USD traded at 1.3067 as of 4:24 GMT today after falling from 1.3060 to 1.3040 earlier. GBP/USD went down from 1.5121 to 1.5109. USD/JPY was little changed at 91.92.
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