Bernanke Cites Weak Economy and Unemployment
On Tuesday (Dec. 8th) the US dollar fell after Fed Chairman Ben Bernanke said that the US economy is weak and unemployment is expected to continue. He also said that the Fed would leave rates low for an ‘extended’ period dousing market speculation that the Fed would raise rates after last week’s better than expected jobs data. Last week US employers cut 11,000 jobs, far less than the 130,000 that had been predicted. Last Friday’s jobs data had led to speculation that the Fed would cut rates in mid 2010. Jun Kato of Shinkin Central Bank Research Institute stated, “Bernanke’s remarks reminded people that the economy is not rosy yet.” On Tuesday the dollar index .DXY fell 0.2 percent to 75.651.
German Industrial Production Declines
The euro fell against the dollar on unexpected German data that showed that German industrial production declined 1.8% in October. Further pressuring the euro was the news that Fitch Ratings cut Greece’s rating from A- to BBB+. The rating cut followed news that Standard and Poor’s reported that Greece’s banks faced the biggest risks in Europe. Concerns about Dubai rose as Moody’s ratings agency downgraded six Dubai-linked issuers and said that no ‘meaningful’ support could be expected from the Dubai government. Remarks by Jean Claude Trichet who said the Euro Zone faces a prolonged and bumpy recovery did little to help the euro in currency markets.
Dollar at One Month High vs. Euro
The dollar is now at a one month high vs. the euro and the dollar posted its biggest gain since June last Friday as the jobs report showed that US employers’ cur fewer jobs since the recession began. The euro traded at $1.4826 and against the yen the dollar traded at 89.41. The dollar and stocks have tended to trade opposite directions since the recession began. Vassili Serebriakov of Wells Fargo stated, “We’ve seen this equity-dollar correlation reinstalled. The key to breaking the correlation is consistently improving U.S. data shifting interest-rate expectations, and outside of payrolls we haven’t really seen that.”
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