Dollar edges up amid rumoured Bernanke reappointment

Tuesday 26th January 2010

The New Zealand dollar edged up amid speculation Federal Reserve chairman Ben Bernanke will be reappointed by the Senate this week, while President Barack Obama is tipped to flag a new package of stimulus measures for American middle-class families, easing investors’ concerns about the state of the global economy.

Senior White House adviser David Axelrod told CNN the President is confident Bernanke will be appointed for a second term to head up the Fed after two Democrat Senators said they were undecided over the weekend, while Senate Republican leader Mitch McConnell said there would be bipartisan support. This helped calm markets after investors eschewed higher yields on Friday amid rumours Bernanke, who helped steer the U.S. through its worst recession since World War II, would miss out on the position.

“People are trying to digest what’s happened over the last week or so” with investor sentiment sapped over looming bank regulations in the U.S., said Danica Hampton, currency strategist at Bank of New Zealand. “Sentiment towards growth-sensitive currencies was helped by rumours suggesting Fed Chairman Bernanke will be appointed for a second term.”

The kiwi edged up to 71.41 U.S. cents from 71.35 cents yesterday, and rose to 65.12 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.06. It increased to 64.45 yen from 64.35 yen yesterday, and advanced to 78.91 Australian cents from 78.67 cents. It slipped to 43.95 pence from 44.14 pence yesterday, and was little changed at 50.47 euro cents from 50.40 cents.

Hampton said the currency may trade between 71 U.S. cents and 71.80 cents today, though volumes should be low with a national holiday in Australia. Though she predicts there may be some weakness in the kiwi early this week, she expects it will end the week strongly.

Adding further support for the markets were reports that President Obama’s State of the Union address would announce new stimulus measures for the so-called sandwich generation, those people stuck between sending their children to university and caring for elderly parents, instead of outlining tougher regulations for banks’ risk-taking.

A larger than expected monthly decline of almost 17% in U.S. existing house sales encouraged a sell-off in the greenback. The Dollar Index, a measure of the U.S. dollar against a basket of six currencies, was little changed at 78.23.

Businesswire.co.nz

Comments from our readers

No comments yet