►Bernanke caution gives markets pause, as US dollar rebounds
Michael Hewson/ShareCast/Oct 18
For the last six weeks the US dollar has slid lower relentlessly on speculation that the Federal Reserve will embark on a further stimulus program to shore up the flagging US economy. Bernanke’s comments on Friday more or less confirmed the inevitability of such a move, and yet the US dollar index despite making new 8 month lows actually finished the day higher than when it started, which perfectly illustrates the dichotomy that can exist in currency markets between expectation and reality.
The fact is the Fed chairman’s comments about the difficulties in determining the pace, size and costs of any purchases are weighing on the FOMC committee with respect to how aggressive they should be at their November meeting. This has given the markets pause for thought and may give the US dollar some respite. Bernanke’s views on the prospects of the US economy are likely to be further analysed when he gives another speech on Tuesday night.