USD may weaken as Federal Reserve meeting looms

August 8th, 2011 by James

USD may weaken as Federal Reserve meeting loomsThe United States dollar is expected to fall next week, especially against the Japanese Yen (JPY) and Swiss Franc (CHF) as investors are looking to a Federal Reserve meeting that may offer hints of further easing as worries about the global economy grow.

Stocks sold off and safe-haven assets soared this week after weak data fueled fears that the world economy is slipping back into a recession.

From Reuters.com:

The Swiss franc climbed to record highs against the dollar and euro on Friday, before easing back. The dollar last traded up 0.2 percent at 0.7665 franc, while the euro rose 1.5 percent at 1.0960 francs.

For the week, the dollar lost about 3.0 percent against the Swiss currency and the euro dropped 3.7 percent.

Against the yen, the dollar was last at 78.49, down 0.7 percent on the day, but rose 1.2 percent on the week after Japan intervened and eased monetary policy to weaken the yen.

Sharp moves in financial markets and the spike in volatility prompted aggressive policy actions by several major central banks in recent days, including a surprise interest rate cut by Switzerland, yen-selling intervention by Japan, and a resumption of bond buying by the European Central Bank.

“With markets already on the defensive and the macroeconomic picture deteriorating, (Fed Chairman Ben) Bernanke cannot afford to be tight-lipped about further quantitative easing,” said Ashraf Laidi, CEO of Intermarket Strategy Ltd. in London.

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