Dollar gains on news of new Fed Chief nomination

October 9, 2013

Market sentiment was given a boost after US markets closed overnight that US President Obama will announce on Wednesday the nomination of Janet Yellen for the Federal Reserve Chair.

Current Fed Chief Ben Bernanke will be leaving his post in January and Yellen is expected to take over from him. She is also seen to be dovish like Bernanke and is a strong supporter of Bernanke’s quantitative easing program and loose monetary policy to stimulate the US economy. 

As Fed Chief, Yellen will also likely continue with Bernanke’s policies, meaning that there will be a delay in tapering stimulus. 

For now markets are cheering this, based on the current economic situation. The provision of liquidity in the financial system from the central bank is likely to be still necessary.

Based on the news, markets felt more upbeat and this helped lift the US dollar and investors moved away from safe havens like the Japanese yen. Investors temporarily shifted their focus away from the US government shutdown woes and the looming debt ceiling.

USDJPY advanced 0.6 percent to 97.41 yen, while EURJPY gained 0.5 percent to 132.14 yen.

Euro and sterling eased due to the stronger dollar. 

EURUSD fell 0.1 percent to $1.3565 and GBPUSD slid to $1.6060.

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