Late on Monday, the Chairman of the Federal Reserve system, Ben Bernanke, signaled that it is very likely that U.S. interest rates will be hiked soon, to combat inflation. As a result of these comments, the U.S. currency gained against major currencies on Tuesday trading. In early morning trading on Wednesday in Sydney, the U.S. currency consolidated its gains against major currencies.
Richard Fisher, Dallas Federal Reserve Bank President’s comments also fueled the rally of the U.S. dollar. According to Fisher, the Federal Reserve will do everything possible to curb inflationary pressures, even if the economy is weak.
On June 10, 2008 at 11:00 am (01:00 GMT), the U.S. Dollar traded at 107.45 Yen, compared to 107.42 Yen, while the Euro traded at $1.5463 compared to $1.5465 in late trading in New York.
Market dynamics have now changed as the U.S. Federal Reserve has now joined the European Central Bank in tackling inflationary pressures. Most analysts believe that U.S. policy officials believe that the weaker U.S dollar would harm the U.S. economy.
According to John Noonan, a foreign exchange expert, the market is now convinced with good evidence that the central banks have targeted reducing inflation and commodity prices even at the expense of strong economic growth.