Forex Blog: Currency Trading News & Analysis.

March 13th 2008

Currency Traders Dump Bernanke

On January 31, 2006, Ben Bernanke officially replaced Alan Greenspan as Chairman of America’s Federal Reserve Bank. At that time, the EUR/USD and USD/JPY exchange rates hovered around 1.20 and 118, respectively. For the first year of his tenure, Bernanke lived up to investor expectations and burnished his credentials as an inflation fighter by continuing a string of interest rate hikes begun by Greenspan. Fast forward to today, where the US economy is in tatters, inflation is raging, home and equity prices are slumping, and the Dollar has declined to $1.55 against the Euro and 100 against the Japanese Yen. Meanwhile, forex volatility levels are climbing rapidly, suggesting that the Dollar’s troubles still havn’t reached their climax.

Needless to say, currency traders- and a whole host of other investors and analysts- are furious with Bernanke. Many insist that he misled them, by downplaying the seriousness of housing jitters and insisiting stubbornly that inflation isn’t a problem.  Even now, he is lowering interest rates in order to spur the economy, but at the expense of price stability.  As any experienced currency trader can attest, low interest rates and high inflation are a recipe for a weak currency. Reuters reports:

Bernanke "has sacrificed the dollar in an attempt to save jobs and U.S. business," said one analyst. "He had to do something, but at the same time he is only putting off the crisis. We will face tight credit for a decade and we will have stagflation."

Read More: Bernanke rapidly loses fans in the forex world

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Posted by Adam Kritzer | in Central Banks, US Dollar | No Comments »

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