NEWS / Foreign Exchange

Dollar Fell on Bernanke Testimony

11/8/2007 04:15 pm: EUR/$..1.4672 $/JPY..112.62 GBP/$..2.1088 $/CHF..1.1272 AUD/$..0.9267 $/CAD..0.9347

Dollar Fell on Bernanke Testimony

The dollar slid further across the board after the Fed Chairman Bernanke testified in front of the Congress. The euro hovers just below the 1.47 level against the dollar, while the sterling climbed to as high as 2.1116 versus the dollar. The yen also gained against the dollar from above 113 to a session low at 112.07.

Bernanke today warned that the housing sector conditions may become more severe, increasing worries over the housing and credit issue. He also said the nation????s economic growth may slow noticeably, raising expectations for further rate cut. Interest rate futures showed traders are pricing in an 82 percent chance that the Fed will cut interest rates by a quarter-percentage point in December.

The Euro and sterling remains robust against the dollar after the European Central Bank and the Bank of England left their interest rates unchanged at 4.0% and 5.75% respectively as expected today.

The ECB and BOE postponed rate hikes they planned earlier because of this summer????s global financial market turmoil triggered by US credit crunch. Before the extent of damage from subprime loans related investments are clear, the banks need to keep cautious and do not rush raising rates though the inflation seems to be elevated. In the short term, these two central banks are more likely to keep their benchmark rates unchanged.

Euro-region inflation accelerated to 2.6% in October, above the central bank????s 2% target rate. Crude oil rose to nearly 100 dollars per barrel, lifting inflation risk. In the post-meeting press conference, ECB chairman Trichet said last data confirmed price risks to the upside and fundamentals are sound. The bank will continue to pay great attention to the market and keep inflation expectations anchored.

While global equity market fell today, investors cut their risk appetite. The yen, as a low yielding currency, benefited from the decline in carry trades.

Tomorrow will see US September international trades(exp 58.5b, prev 57.59b) and University of Michigan consumer sentiment(exp 97, prev 97.6).

EURUSD will face interim resistance at 1.47, followed by 1.4730 and 1.4770. Additional ceilings will emerge at 1.48, backed by 1.4850. Support starts at 1.4650, backed by 1.4620, 1.46 and 1.4580. Subsequent floors are eyed at 1.4530.

GBPUSD encounters interim resistance at 2.11, backed by 2.1130 and 2.1170. Subsequent ceilings will emerge at 2.12, followed by 2.1050 and 2.1020. On the downside, support begins at 2.10, followed by 2.0980 and 2.0930. Additional floors are eyed at 2.09, backed by 2.0880 and 2.0850.

USDJPY encounters interim resistance at 113, backed by 113.30 and 113.50. Subsequent ceilings will emerge at 114, followed by 114.30 and 114.60. On the downside, support begins at 112.30 and 112, followed by 111.80. Additional floors are eyed at 111.50, backed by 111.20 and 111.