By: DailyForex.com
The U.S. Dollar firmed on Wednesday following comments made by the Federal Reserve chairman who said that for the time being the existing monetary policy would be unchanged but that the Fed would be cognizant of improvements in the U.S. economy which might lead to a reduction or slow down of asset purchases. During the Congressional testimony, Ben Bernanke also said that the Fed was aware of the inherent risks for maintaining ultra low interest rates over an extended period of time suggesting that an interest rate hike could also be in the cards before the year’s end. He further said that the central bank would continue to monitor events with a view to altering the pace of stimulus.
The news of even a possible cessation of the current loose policy gave U.S. Dollar bulls reason to rally and pushed the U.S. Dollar index up more than 0.5% to 84.422 .DXY, a 34-month high. The greenback was also broadly firmer against its major rivals; the USD/JPY traded at a 4½ year peak of 103.74 Yen before retreating slightly to 103.23 Yen, still a 0.1% gain. The EUR/USD traded at a session low of $1.2834, a loss of off of about 0.2% and moving away from Wednesday’s peak of $1.300. Against commodity linked currencies the greenback’s bounce was even more substantial; the AUD/USD pair slipped more than 1% after Bernanke’s comments with an additional 0.3% drop seen in the Asian session and more recently the pair was trading at $0.9656.