Federal Reserve Chairman, Ben Bernanke, gave risky assets a major boost after he suggested the US economy may still require another quantitative easing boost to shore up, what he described as, a sluggish improvement in US employment. Investors immediately took the remarks as a promise of more easy money and consequently dumped the safer US dollar in favour of high-yielding stocks and currencies. The yen also weakened as rallying stock markets encouraged currency traders to take on more risk. The greenback was the biggest loser though, sinking to three-week lows versus the British pound, euro, and against a basket of currencies. The euro’s allure was rather impressive, although investors appear to be expecting eurozone leaders to expand the area’s anti-crisis measures at this week’s meeting between finance ministers.
Sterling
Sterling gained over one per cent in value against the US dollar to reach three-week highs after comments from the Federal Reserve implied that more quantitative easing was still very much a policy option. The news gave equity markets a boost and encouraged investors into more riskier currencies sending the pound sharply higher.
US dollar
The US dollar extended its recent losing streak, plumbing to three-week lows versus the euro and against a basket of currencies following dovish comments from the Federal Reserve’s Ben Bernanke. The Fed chief warned markets that in order for US unemployment to return to anywhere near normal levels, the economy will need to expand substantially quicker than it has been doing. Investors took the statement as a warning the Fed will keep interest rates at record lows until 2014 and will look to add another round of asset purchases should the recovery falter.
Euro
The euro has broken through stiff technical resistance levels against the US dollar to move within striking distance of December 2011 highs on rumours eurozone finance ministers are preparing to bolster the region’s financial firewall at this week’s meeting. The single currency also received support from a pick up in risk appetite after markets took comments from the Federal Reserve as a sign that another cash boost was in the pipeline.
Japanese yen
Despite signs of resilience over the past two weeks, the yen was back under selling pressure as demand for safer investments fell after Federal Reserve Chairman, Ben Bernanke, indicated there is still a chance the Federal Reserve will expand its quantitative easing programme to support growth.
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