MORNING BRIEFING: Dollar takes breather as markets await Bernanke’s speech

What’s new:
Forex: Profit-taking and stops give dollar some respite, risks further declines
Global Markets: Stocks and commodities ease as market awaits Bernanke speech
Japan: Finance Minister Noda says Japan will continue decisive steps on FX
China: China tells US not to make yuan a scapegoat
Euro zone: ECB’s Stark says inappropriate currency movements are damaging to economic and financial stability
United States: Bernanke expected to speak about Fed’s stance at 14:15 CET
United States: Treasury to judge China’s yuan policy

Today:


Asian Rates & Indices:
EURUSD: 1.4096 - 1.4008
USDCHF: 0.9563 – 0.9528
GBPUSD: 1.6061 - 1.5971
EURJPY: 114.76 – 114.10
USDJPY: 81.62 – 81.13
DowJones: 11'094.57 -0.01%
NASDAQ: 2'435.38 -0.24%
S & P 500: 1'173.81 -0.36%
Nikkei: 9‘500.25 -0.87%
Shanghai: 2'971.16 +3.18%
Gold: $ 1'380.8
Crude Oil: $ 82.85

Comments:
    
The US dollar found some support early Friday, as investors trimmed short positions in the greenback, pulling away from a 10-month low versus a basket of currencies. The trend of dollar bearishness is expected to persist on the back of market expectations for the Federal Reserve to unveil additional quantitative easing next month.

The Australian dollar fell to 0.9890 against the US dollar, to recover to 0.9940 at Europe’s open, but still away from the 28-year peak hit yesterday at 0.9994. The euro also dropped from more than an 8-month high reached on Thursday, falling as low as 1.4008, but is now at 1.4074. As well, on Thursday the greenback fell to a fresh 15-year low against the yen, to 80.89, while also extending its decline against the Swiss franc, now to 0.9463.

Global stocks and commodities eased as investors took profits, while buying back US dollar, ahead of a much anticipated speech by the Fed Chairman Bernanke. The market is finally expected to hear Bernanke's thoughts on the subject of further easing. Investors are uneasy over whether Bernanke will explicitly support the idea and, if he is noncommittal, the dollar could find some further support.

Also today, the US Treasury is expected to decide whether to label China as ‘currency manipulator’. On the other hand, China has told the US not to make the yuan a scapegoat. Commerce Ministry spokesman Yao Jian also said that it was not fair to criticize the yuan's exchange rate simply by pointing at China's export strength.

Good weekend,

Emman Xuereb
Trading Desk
RTFX Ltd
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