Positive Action by Fed May Trigger Desire for More Risk
By James A. Hyerczyk
02 December 2008 @ 06:58 pm EDT
A comment by Fed Chairman Bernanke has triggered a change in sentiment of global investors. Late yesterday Bernanke announced that the Fed may be interested in buying its own debt. This move helped stabilize the U.S. stock markets and gave traders confidence to pursue more risk in hopes of a higher return. The positive reaction by the markets indicates that investors want to see a more proactive approach from central banks rather than just economic stimulus plans and interest rate cuts. The stock markets have reacted positively to the news. Money is starting to shift toward higher yielding currencies like the Euro, British Pound, Australian Dollar and New Zealand Dollar.