On January 31, 2006, Ben
Bernanke officially replaced Alan Greenspan as Chairman of America’s
Federal Reserve Bank. At that time, the EUR/USD and USD/JPY exchange
rates hovered around 1.20 and 118, respectively. For the first year of
his tenure, Bernanke lived up to investor expectations and burnished his
credentials as an inflation fighter by continuing a string of interest
rate hikes begun by Greenspan. Fast forward to today, where the US
economy is in tatters, inflation is raging, home and equity prices are
slumping, and the Dollar has declined to $1.55 against the Euro and 100
against the Japanese Yen. Meanwhile, forex volatility levels are climbing rapidly, suggesting that the Dollar’s troubles
still havn’t reached their climax.
Needless to say, currency traders- and a whole host of other
investors and analysts- are furious with Bernanke. Many insist that he
misled them, by downplaying the seriousness of housing jitters and
insisiting stubbornly that inflation isn’t a problem. Even now, he is
lowering interest rates in order to spur the economy, but at the
expense of price stability. As any experienced currency trader can
attest, low interest rates and high inflation are a recipe for a weak
currency. Reuters reports:
Bernanke "has sacrificed the dollar in an attempt to save jobs and
U.S. business," said one analyst. "He had to do something, but at the
same time he is only putting off the crisis. We will face tight credit
for a decade and we will have stagflation."
Original post by Jimmy Atkinson and software by Elliott Back
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