The US dollar extended its decline this week on the outlook for another round of the quantitative easing by the Federal Reserve but it unexpectedly rebounded by the end of the week after the speech of the Chairman Ben Bernanke.
The dollar remained very weak on the outlook for the Fed to stimulate the US economy. The minutes of the Federal Open Market Committee supported this outlook. The unfavorable US macroeconomic fundamentals reinforced the prospects for the stimulus.
The Bernanke’s speech should to confirm the expectations of the easing. And in fact it did as Bernanke said: “the FOMC is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation over time to levels consistent with our mandate”. Yet instead of driving the dollar even lower it had completely opposite effect. Or was it just coincidence and the rebound of the dollar was just a correction? Or we’ve seen the beginning of the new trend? It’ll be interesting to see.
EUR/USD opened this week at 1.3980, fell as low as 1.3775, climbed as high as 1.4156 and closed at 1.3974. GBP/USD opened at 1.5929 and dropped to the weekly low of 1.5754, yet managed to rebound and closed at 1.5982. USD/JPY fell from 81.73 to 81.41.
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