US Dollar Jumps on Bernanke, NIKKEI Loses 7.32% USDJPY Dips amid NIKKEI Slide - 23.5.2013

The greenback has been very volatile during Ben Bernanke testimony yesterday as investors were highly sensitive on his comments due to increasing speculation that the FED may tighten its monetary policy. FED Chairman recognizes that the economy has overpassed many of its hurdles toward a solid recovery but it is still vulnerable and possible withdrawal from asset purchases is running the risk to end the economic recovery with inflation eventually falling. He also stated that is aware of risks and costs of long periods of low interest rates and the Committee will continue assessing progress made towards its goals, most important goal is to reduce Unemployment rate below 6.5% with inflation not exceeding 2.5%. Following Ben’s testimony investors were more confident that decreasing asset purchases would not come as soon as in June. The latter underpinned US dollar against its major peers with its index rising from support 83.43 to a more than 2 ½ -year high at 84.46.

US indices advanced in the beginning of their session as risk sentiment was improved by Ben’s testimony with S&P 500 inching up to 1686.70 but eventually closing negative by 0.83% at 1655, Dow Jones traded in a similar way jumping to new high at 15538.42 but finally ended to close down by 0.52%, at 15307. US equities weighed by FOMC meeting minutes of May 1st decision where some Committee members stated that premature withdrawal from asset purchases should be possible.

Elsewhere, the Euro versus the greenback spiked as high as 1.2997 on Ben’s comments and then dropped sharply to 1.2824 as funds were flowing to US market. Against the Japanese Yen, the US dollar jumped as high as 103.65 and was volatile between 103.65/102.75, as of writing though it lost lots of ground dipping as low as 101.49. The latter was a result of positive correlation of USDJPY with NIKKEI 225, the index printed huge losses of 7.32%, today.

Looking ahead, traders focus on PMIs for European members and the Eurozone, French PMIs already released with manufacturing below 50 but above previous month figure and services below previous month figure, mixing Euro sentiment. Lastly, US Jobless Claims and US PMI are insight.