Franc Falls as Bernanke Improves Sentiment on Markets

The Swiss franc slumped today after Federal Reserve Chairman Ben. S. Bernanke spoke today, improving sentiment on markets, while rumors abound that Switzerland’s policy makers are preparing another action to weaken the Swiss currency.

There are different opinions on what steps Switzerland is going to take in order to weaken its currency. Some analysts speculate that the Swiss National Bank is preparing another intervention. Some experts predict that local banks may impose charges for franc deposits. Whatever the truth is, the rumors undermine franc’s strength.

Optimism, caused by the speech of Chairman Bernanke, influenced the franc even more, perhaps. Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce, thought:

What Bernanke said suggested was perhaps the world’s economic weakness is not so bad that it warrants another round of QE, and that helped to damp demand for the franc. There has also been speculation about the SNB’s possible further action on the franc, which makes the market cautious.

USD/CHF climbed from 0.7928 to 0.8060 as of 20:11 GMT today after touching the daily high of 0.8157, the highest level since July 22. EUR/CHF advanced from 1.1401 to 1.1684. CHF/JPY sank from 97.61 to 95.05, while earlier it reached the lowest price since June 20 — 94.44

Dollar Drops After Bernanke Speech & GDP Report

The US dollar fell today after the report showed that the US economy expanded with slower pace than was predicted by specialists and Federal Reserve Ben S. Bernanke hinted at possibility of additional stimulus.

According to the preliminary report, US gross domestic product grew 1.0 percent in the second quarter of 2011, following the increase by 0.4 percent in the first quarter. The advance estimate promised growth by 1.3 percent, while market participants expected rise by 1.1 percent.

Bernanke said today at the Federal Reserve Bank of Kansas City Economic Symposium in Jackson Hole, Wyoming, that the Fed has means to further stimulate the US economy, stating “the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus”. Chairman added that in the long run the economy can overcome its current difficulties:

Notwithstanding the severe difficulties we currently face, I do not expect the long-run growth potential of the U.S. economy to be materially affected by the crisis and the recession if — and I stress if — our country takes the necessary steps to secure that outcome.

The speech was well received by markets and stocks advanced, pushing the Standard & Poor’s 500 Index up 0.7 percent after it earlier fell 2 percent.

EUR/USD climbed from 1.4377 to 1.4476 as of 17:00 GMT today, following the drop to 1.4328. GBP/USD rose from 1.6278 to 1.6341 after it dropped to 1.6206 earlier. Meanwhile, USD/JPY tumbled from 77.44 to 76.67

Yuan gets stronger as China expected

The Chinese yuan gained today on the speculation China will allow the currency to appreciate to combat inflation that accelerates with fast pace.

China’s central bank set the exchange rate at 6.3987 per dollar, increasing the fixing for the second straight day. Market analysts explain that China needs help of a strong currency to deal with the fast growth of the consumer prices. Today’s report that showed growth of manufacturing confirmed the trend for increasing inflation remains in place.

USD/CNY went down from 6.4015 to 6.3980 today as of 11:07 GMT, gaining 0.07 percent. That was the fist gain in five sessions.

[forex news]