Monday trading began with a sharp fall in the U.S. dollar as markets reacted to the big story that Lawrence Summers has withdrawn from the race for the role of the next Federal Reserve Chairman to replace Ben Bernanke.
Market was warming itself up to the appointment of Summers which is why recently we have seen the dollar strengthening. Summers was expected to begin tapering and tightening.
Janet Yellen is now seen to be the front runner and is seen as being very dovish and more in favour of loose monetary policy and is expected to continue with the Fed’s current stimulus program. Currently the Fed busy $85 billion worth of bonds a month to prop of the U.S. economy. Such a measure tends to weaken the dollar.
The dollar fell across the board just as Asian currency markets opened for trading on Monday, with most currency pairs opening with a huge gap from Friday’s close.
USDJPY moved lower and opened at 98.68 versus Friday’s close of 99.35 yen while EURUSD moved higher, opening over 50 pips higher at $1.3357 compared to Friday’s close of $1.3296.
AUDUSD spiked up to a session high of $0.9391 versus Friday’s close of $0.9247 before steadying at $0.9324.Publication source