Dollar drops below 100 yen after Bernanke talks
NEW YORK (July 10) The U.S. dollar remained lower Wednesday, extending losses after minutes of the Federal Reserve’s June policy meeting offered no clues on when the central bank is likely to begin scaling back its extraordinary monetary stimulus efforts and Fed chief Ben Bernanke said the central bank wouldn’t be in a hurry to raise rates when the jobless rate falls to its 6.5% target.
Minutes showed around half of the 19 members of the Fed’s policy-setting Federal Open Market Committee supported scaling back purchases before the end of the year, while “many” said asset purchases would likely be required into 2014.
Later, Fed Chairman Ben Bernanke offered no comments on the bank’s current monetary policy stance in prepared remarks delivered at a speech in Boston. But in a question-and-answer session, he emphasized the Fed’s accommodative policy stance and indicated that the central bank wouldn’t be in a hurry to hike rates after the unemployment rate hits the Fed’s policy target.
The dollar fell hard versus the Japanese yen on Bernanke’s remarks, dropping back below the 100-yen level to trade at ¥99.71, down from ¥101.05 in North American trade late Tuesday.
The ICE dollar index, which measures the U.S. unit against six other major currencies, traded at 84.027 versus 84.598 in North American trade late Tuesday. The index traded near 84.156 ahead of the minutes.
“The minutes did not send a clear signal on when tapering is likely to start, although we still think the September meeting is most probable,” said Jim O’Sullivan, chef economist at High Frequency Economics in Valhalla, N.Y.
Dollar bears, however, argued that the market reaction disappointed traders looking for definitive guidance.
“Once again it seems like the market is trading on exit-and-recovery hopes rather than policy maker realities. The Fed minutes prove to be more dovish than the market had hoped, resulting in the dollar weakening” immediately after the release of the minutes, said Douglas Borthwick, managing director of Chapdelaine Foreign Exchange.