The Yen suffered its biggest one-day percentage decline against the Euro in more than 3 years and the Dollar in more than 2 years on Wednesday, as investors took recovering US stock markets as a cue to slash short-term bets that the Japanese currency would strengthen. Foreign exchange dealers have been using global equity markets as a gauge of risk appetite, particularly because the tightening credit market has lifted volatility and slowed the carry trade, in which investors borrow in low-yielding currencies such as Yen to buy higher-yielding, riskier assets. US economic growth data on Thursda (more…)
The Nikkei jumped 2.6% on reports that U.S. President George W. Bush would push forward a plan to aid subprime mortgage borrowers. Federal Reserve Chairman Bernanke on Wednesday stated that the Fed was ?prepared to act as needed? to protect the U.S. economy. (more…)
European Central Bank President Jean-Claude Trichet added to weight on the Euro on Monday after he said his recent comments on policy on Aug. 2 preceded a period of market volatility. In those comments on monetary policy, he used the phrase “strong vigilance,” signaling action on ECB rates was likely. But that was little reassurance for dealers who had been betting another benchmark interest-rate hike by the ECB would likely boost the euro. This week, investors will be especially focused on Bernanke’s speech on Friday to see if he sheds light on whether market developments require additional m (more…)
The Dollar extended its decline after the release of minutes from the Aug. 7 Federal Reserve policy meeting showing the US central bank acknowledging a policy response may be necessary if financial market conditions worsen. Fed members expected a return to more normal conditions, but recognized the process will likely take some time, particularly in relation to sub-prime mortgages. Volatility in financial markets has fueled speculation the Federal Reserve may cut its benchmark interest rate, after it reduced the discount rate at which banks borrow directly from the Fed by 50 basis points to 5. (more…)
