Dollar and Yen Post Gains
The Japanese yen and the US dollar rose against most major currencies on Tuesday (Feb. 23rd) after reports that showed a decline in German business and lowered US consumer confidence. The reports couples with the ongoing Greek crisis sent investors in search of safe haven assets. The yen was the big winner gaining on almost all major currencies and the troubles euro fell even further after a report by the Munich-based Ifo institute said that German business confidence fell in February for the first time in eleven months. Brian Dolan of Forex.com stated, “It’s an abysmal consumer confidence number and the risk trade is under pressure as a result. Treasuries are rallying, yields are falling and that pushes the yen higher.” Many investors believe that global recovery has stalled and are putting their money into safe haven assets and currencies. Fabian Eliasson of Mizuho Corporate Bank Ltd. Said, “People are not feeling optimistic on the economic outlook and the yen becomes the safer choice. It could be a one-off low mark but the stock market is suffering from this now.”
All Eyes On Bernanke and Fed
Investors are waiting for Fed Chairman Bernanke’s statements to congress on Wednesday. Many expect Bernanke to tell congress that the Fed will not tighten monetary policy anytime soon. San Francisco Federal Reserve Bank President Janet Yellen said that the US economy still needs extraordinarily low interest rates to address “undesirably low”, inflation. Bernanke will testify to congress on Wednesday and Thursday. Tomohiro Nishida of Chuo Mitsui Trust and Banking stated, “The market will try to determine what the next move by the Fed is likely to be and is waiting to see if Bernanke will say something which was not in his written testimony earlier this month,. Although Fed officials sought to stamp out the idea that the discount rate increase is a tightening of monetary policy, the move did give the impression the Fed had started to exit from loose monetary policy.”
Merkel Attacks Speculators
Euro sentiment remains negative as Greece’s fiscal problems increase. The euro has fallen a full 10% vs. the US dollar since November 2009. German Chancellor Angela Merkel said that resolving the Greek crises is the “core element” in re establishing confidence in the euro. In a speech on Monday Merkel stated, “The debt that had to be accumulated, when it’s going badly, is now becoming the object of speculation by precisely those institutions that we saved a year-and-a-half ago. That’s very difficult to explain to people in a democracy who should trust us.” Clearly the Euro’s troubles are not going away anytime soon.
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