Bernanke Says Rates to Remain Low

The US dollar has retreated from a five week high after remarks by Fed Chairman Ben Bernanke who said that the US economy is still fragile and that unemployment is likely to remain high. He also dampened speculation that the Fed would raise rates on recent improvements in US employment figures. Last week’s non farm payrolls report showed that 11,000 US jobs were lost in November instead of the 130,000 that had been predicted. Brian Dolan of Forex .com had this to say about Bernanke’s remarks, “Bernanke is emphasizing the weakness and the downside to the U.S. economy. Therefore, he’s postponing interest rate hike expectations. He left a very clear impression that rates will remain on hold.”

Euro Pressured by Greek Downgrade

The euro declined against the dollar after data showed that German industrial output fell an unexpected 1.8% in October. The euro was also pressured by news that Fitch’s rating agency had lowered Greece’s rating from A- to BBB+. A Standard and Poor’s report said that Greece’s banks are Europe’s riskiest. Dubai debt fears lingered after a report said that Dubai World could no expect significant government support. James Hughes of CMC Markets said, “While you’ve got weak data coming out and doubts about Greece and Dubai you will get fickle markets ruled by fear.” Moody’s downgraded six Dubai-linked issuers after concluding that the company could expect no ‘meaningful’ support from the Dubai government.

High Yielders Unchanged

A drop in US and European stocks sent the US dollar to a near one month high against the euro. The greenback posted its biggest gain since June after US job figures showed that US employers cut fewer jobs since the global recession began. Vassili Serebriakov of Wells Fargo stated, “We’ve seen this equity-dollar correlation reinstalled. The key to breaking the correlation is consistently improving U.S. data shifting interest-rate expectations, and outside of payrolls we haven’t really seen that.” High yielders like the Aussie and Kiwi dollars remain relatively unchanged in advance of a speech from Reserve Bank of Australia Governor Glenn Stevens.