DislikedLets see what happens over the next couple of hours.....
WASHINGTON (Dow Jones)--Federal Reserve Chairman Ben Bernanke on Tuesday put the U.S. dollar squarely on the Fed's radar screen, saying its slide against other currencies has led to an "unwelcome" rise in U.S. inflation and may be a factor in inflation expectations.
Bernanke also suggested that the Fed is unlikely to lower official interest rates further, though his remarks suggested that - barring a further rise in inflation expectations - the Fed probably won't contemplate higher rates until there is more stabilization in home prices.
Still, Bernanke appeared to shift the policy debate away from economic strains and toward inflation and a defense of the dollar, which could provide the basis for higher rates eventually.
"We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations and will continue to formulate policy to guard against risks to both parts of our dual mandate," Bernanke said in prepared remarks delivered via satellite to an international monetary conference in Spain.
He said that, along with the Treasury Department, the Fed will "continue to carefully monitor developments in foreign exchange markets." Fed policy, as well as the economy's underlying strength, "will be key factors ensuring that the dollar remains a strong and stable currency," he said.
Bernanke also indicated, as Fed Vice Chairman Donald Kohn has recently, that the Fed's current rate stance is "well positioned" to promote moderate growth and low inflation.
On April 30, the Federal Open Market Committee lowered the target fed funds rate at which banks lend money to each other by 0.25 percentage point to 2%, the seventh reduction since September for a total 3.25 percentage points of easing.
An accompanying policy statement - supported by ensuing remarks by Fed officials - suggested policymakers are unlikely to lower rates further, a view further cemented by Bernanke's remarks.
Financial markets have even priced in a rate hike as early as autumn amid signs that higher food and energy prices are affecting inflation expectations.
But Bernanke also signaled that downside risks to the economy remain even though the U.S. is likely to see "better economic conditions" in the second half of the year after a weak first half. Fed officials had previously indicated that the economy may contract in the first half, though that appears unlikely now based on recent economic data.
"Until the housing market, and particularly house prices, shows clearer signs of stabilization, growth risks will remain to the downside," Bernanke said. And while consumer spending has been "a bit better than expected," Bernanke said households still face "significant headwinds" from higher energy prices, a soft job market and tumbling confidence. Recent oil-price gains are also further risk to growth, he said.
Meanwhile, financial market conditions have improved, but they remain "strained" and "some key funding and securitization markets have shown only tentative signs of recovery," he said. He pegged total credit write-downs in the U.S. and Europe at about $300 billion.
Faster export-growth has offset some of those headwinds, Bernanke said, and should continue to do so.
Bernanke's dollar comments in particular are notable since Fed officials usually defer to Treasury officials when discussing exchange rates. But the dollar's decline - which some analysts attribute to the Fed's recent aggressive policy easing - has been blamed in some circles for the recent rise in commodity prices.
"His defense was about as strong as he could make it given the U.S. policy of letting only the U.S. Treasury Secretary speak about matters concerning the dollar," said Miller Tabak strategist Tony Crescenzi.
Bernanke's comments suggest the Fed still sees global economic forces - particularly faster growth in emerging economies and supply constraints - as the main factors in the rise in commodities.
Still, Bernanke said high commodity prices are an "important risk" to the inflation forecast, especially if they become embedded in expectations for future inflation.
Recent consumer surveys suggest households expect inflation to rise significantly over the next year, and they've boosted their longer-term expectations as well.
Bernanke warned that higher inflation expectations could become "self-confirming" and are thus a "significant" upside rise to price stability.
Still, Bernanke said that even if commodity prices just level out "even at high levels," there would be a "relatively rapid moderation in inflation." But he noted that there's a "great range of uncertainty" surrounding futures market forecasts for a leveling out in commodity prices.
Bernanke used the international forum to defend the Fed's rate-cut cycle, which hasn't been matched by other central banks like the European Central Bank.
"Our decisive policy actions were premised on the view that a more gradual reduction in short-term rates could well have failed to contain the financial and economic problems confronting us," he said.
-By Brian Blackstone, Dow Jones NewswiresIgnored
Today 10:19am
Warren Forex http://www.forexfactory.com/images/s...ser_online.gif
Warrenforex
Member Since Sep 2006
Posts: 553
http://www.forexfactory.com/images/icons/icon8.gif Some Of My Personal Observations For This Thread !!!
I have seen this movie before and I know how it ends. Here is the plotl line with the facts and the hot air that went with the facts.
My focus is on 5:00 AM and Bernake at 9:00 AM and the US Data due out on Friday.
RIGHT NOW WE HAVE INTERVENTION PERIOD...
Every time the US Dollar reaches a critical level they have no choice but to do something. So we start by Bernake talking up the US Dollar without raising rates which is not a good idea for the US Economy already in recession.
In the last two days there has been more terrible banking news including downgrades. The NFP is called for - 50,000 or so. The ECB and BOE meets on Thursday.
Gold was recovering and Oil was holding. The 2 Year Treasury dropped to 2.49% only 49 basis points over the FED Discount rate of 2.00%
Now let's look at where we are. The Dow is UP 43 or so BUT right after Bernake spoke it was down about 10. The 2 Year US Bonds (Treasuries) are now at 2.54% which means they are being sold again as the Yield goes up.
The USD/JPY was at a Low of 103.86 and is now 105.45 Bid. Gold is down as is Oil. Oil is down $1.76 and Gold down $14.30
All that MONEY is going INTO CASH again just like last week. The EUR/USD is at 154.25 and EUR/JPY has risen off it's Low at 161.815 to 162.61 so some of the Carry Trade is back on in Selling of Yen and Buying of Euro.
The HIGH in USD/JPY was 105.578 so far.
The FUNDAMENTALS have NOT CHANGED 1% BUT Bernake Spoke during a coordinated INTERVENTION by ALL CENTRAL BANKS !!!
Why ? The Answer all they have left is BS and BAD NEWS is around the corner.
I could be wrong since the market is always right but the Initial Reaction to Bernake was BAD for the Dow. That told me a lot. Now Technical Levels have changed on ALL the FX Currencies so Charts should be looked at again.
For MYSELF and PLEASE make your own chices as in the end only you are responsible for profits or losses. I am looking for JUST the RIGHT Moment To SHORT USD/JPY.
Look at the Dow now. It is ONLY UP 15 now.
What is the NEXT RESISTANCE on USD/JPY ?
This is my take on things at the moment !!!
Bruce
I just posted this Copy and Paste On Mayasia
Bruce
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