The greenback declined on Monday against its major rival currencies as the US Federal Reserve’s Chairman Ben Bernanke indicated further easing in US monetary policy. In his latest speech to National Association for Business Economics on Monday, Bernanke expressed that faster pace of economic recovery is required which could bring reduction in unemployment rate. Bernanke was also doubtful on sustainability of the current improvement in employment data.
Traders and most analysts interpreted the indications of further monetary stimulus measures by Federal Reserve which always have a negative impact on the US dollar. Quantitative easing always devalues the currency as its is considered more of an alternative to printing money.
Kathy Lien from GFT commented, “The Fed chairman crushed the hopes of dollar bulls when he said accommodative monetary policy is needed to reduce unemployment, Bernanke used the word accommodative so many times in his speech today that it left little to doubt in our minds that they will not only keep the current stimulus in place for the next two years, but at the first sign of weakness, which can be caused by anything including higher oil prices, they will turn on the printing presses.”
The dollar index DXY which measures the greenback’s performance versus its six major rival currencies declined to 78.896 on Monday as compared to 79.344 on Friday’s North American trading session.
The euro gained to 1.3363 against the US dollar on Monday as compared to 1.3265 on Friday’s late trading hours. Among other currencies, the British Pound gained to 1.5970 versus the greenback on Monday as compared to 1.5874 on late Friday. Against the Japanese yen, the US dollar gained to 82.80 as compared to 82.46 on Friday.
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