FXstreet.com (London) - Greenback held its gains today in the face of a tempered speech by Bernanke, which shunned the possibility of earlier-than-expected rate increases, as the FED Chairman warned the economy remains fragile.
However the market appears to still hold onto this belief as greenback remained resilient. Investors will looking to any key data to support an improving economy. Additionally, the adopted axiom of 'stocks rise, dollar falls' returned today, as markets appeared to return to normality after the correlation was broken for the first time in several months yesterday.
Dollar Index finished the session at 75.73 for a -0.241% change on the day, and USD hit a one month high against the Euro, topping out at 1.4756, as weakened stockmarkets reduced risk appetite. In early Asian trading EUR/USD trades at 1.4822/4, as dollar continues to strengthen, the pair losing 14pips in the first ten minutes of trading (from 1.4836 Asia open).
ECB earlier in the week spoke about unwinding bank support, and market had viewed this as a precipitant to similar expressions from the FED, and potentially a tightening of their ultra-loose monetary policy, however Bernanke firmly grounded any dollar bulls today. An American rates hike would ease pressure on dollar, as it would reduce carry trade on dollar, meaning the unwinding of short dollar positions.
Asian trading will likely remain rangebound as investors look to announcements during the week.