Dollar Weakens Ahead Of Bernanke’s Speech - 26.8.2011

Asian stock markets were mixed on Friday, following yesterday’s broad losses of European and US major stock indices, while several European regulators were even forced to extend their bans on short selling. S&P 500 index lost more than 1.5% by the end of the session, with Nasdaq and DJIA diving even more in negative territory. Investors however mainly declined making large bets ahead of today’s Federal Reserve President’s Ben Bernanke expected speech and some macroeconomic data on the US economy. US Dollar The dollar weakened against its major counterparts in Asian trading hours reversing yesterday’s gains amid speculations Bernanke may indicate that the central bank is ready to apply further stimulus measures. A report today may also show the world’s largest economy expanded less in the second quarter than previously estimated. According to current expectations, the second quarter annual growth pace may have declined to 1.1% from 1.3%. Yesterday reports revealed that initial jobless claims rose last week by 5000 to 417000, according to the Labor Department, while economists projected a modest drop from previous figures to 405000. Euro The euro remains in a tight range against the greenback. After falling somewhat yesterday below 1.44, the single currency surged again in Asian trading hours today to 1.4430. The euro slid yesterday as French, Italian and Spanish stock market regulators extended the temporary short-selling bans they introduced this month in a bid to stem market volatility, Bloomberg informed. Spain and Italy lengthened their bans through September 30, regulators in both countries said in a statement. Moreover France’s Prime Minister Francois Fillon yesterday announced a 12 billion-euro program of spending cuts in 2011 and 2012 mainly through increasing taxes for higher net-worth people and reducing tax benefits. He also said the euro region’s second largest economy will expand by 1.75% in each of the mentioned years instead of previously estimated 2% and 2.25% respectively. According to the plan the deficit will be reduced from 7.1% to 4.5% of GDP by 2012, when the current president Sarkozy seeks reelection. The public debt to GDP ratio, which reaches 82%, may climb to 88% in 2013, according to the International Monetary Fund. Australian Dollar The Australian dollar strengthened against all its major counterparts today after Reserve Bank Governor Glenn Stevens said inflation data is “still concerning,” easing speculation the central bank will cut interest rates. “Inflation bears careful watching, but we can keep it under control… It would be reasonable to anticipate that a decline in confidence arising from the recent events internationally may well dampen demand somewhat compared with the outlook set out in the Statement on Monetary Policy published in early August,” said Stevens. The benchmark interest rate has been kept at 4.75% on August 2 for an eighth straight meeting, while investors increased their bets of a rate cut in the nearest future amid sovereign debt rating cuts deepening debt crisis. “There is a heightened degree of uncertainty at present,” Stevens told lawmakers. “There are major challenges in the global economy and significant forces at work in the Australian economy,” he concluded. Pair AUD/USD rose today from 1.0423 to 1.0502.