By TraderVox.com
Tradervox.com (Dublin) – Federal Reserve Chairman Ben Bernanke announced his plan to add more money in the economy to boost economic growth yesterday, pushing the dollar down to almost four-month low against the euro. As expected, the move generated concerns that the greenback will weaken. The euro looks set for another weekly gain against the greenback and the yen as risk appetite diminished the demand for safe haven currencies. The euro will make a fifth weekly gain against the yen, making this the longest stretch in over three years. The move added to the demand for Asian stocks, which advanced to the highest level since May.
Andrew Salter, a Sydney-based Strategist at Australia & New Zealand Banking Group Ltd, observed that the strong move by the Fed Chairman will make shock-waves for a considerable period of time. In a statement to the Press, the Federal Reserve Chairman Ben S. Bernanke, said that he will engage in an open-ended purchases program to expand the Central Bank’s holdings for long-term security. The third round of quantitative easing will involve mortgage debt purchases worth $40billion a month. The central bank will employ this program in combination with other policy tools to boost the labor market.
The Fed also extended its forecast for the interest rates, saying it might hold them at near zero rates through to mid-2015. This is an extension from its previous forecast of holding the low interest rate through to late 2014. Dollar’s declines against the yen were limited after Takehiko Nakao, Japan Vice Finance Minister, indicated that he Briefed the Finance Minister on the forex situation, and the Bank of Japan is preparing to sell yen on October 31, after the yen surged to post-war record of 75.35 per dollar.
The greenback is set for a 1.4 percent weekly drop against the euro as it traded at $1.2995 per euro at the start of trading in Tokyo today; it had closed the day yesterday at $1.2991, when it touched its weakest level since May 9 of $1.3002. The dollar has lost 0.9 percent against the yen this week and is trading at 77.57 yen per dollar after it dropped to 77.13, the weakest since Feb 9.
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