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Bernanke Says Fed Bond Purchases Not on ‘Preset Course’

Good day forex traders and readers.

The EUR/USD is apparently capped by the resistance of 1.3200. Currency pair movements remain light and the immediate support is 1.3080.

In the report below, it is evident that US Federal Reserve chairman Ben Bernanke comtinues to conduct damage control after the markets reacted to the suggestion of possible quantitative easing tapering. The current US economic recovery is fragile and hence it must be managed carefully.

Good reading from Bloomberg :

Federal Reserve Chairman Ben S. Bernanke said the central bank’s asset purchases “are by no means on a preset course” as he sought to tamp down an increase in borrowing costs that threatens to slow the economic expansion.

“We’re going to be responding to the data,” Bernanke said today to the House Financial Services Committee. “If the data are stronger than we expect, we’ll move more quickly” to reduce purchases . If data “don’t meet the kinds of expectations we have about where the economy’s going, then we would delay that process or potentially increase purchases for a time.”

Stocks and Treasuries rallied on optimism that the Fed is prepared to delay an exit from its quantitative easing program should the four-year expansion show signs of faltering. Fed officials are trying to reverse an increase in Treasury yields since June 19, when Bernanke outlined the possible timing for a reduction in the $85 billion monthly pace of bond purchases.

“Clearly what happened in the markets after June was well beyond what they intended, and they’re trying to pull it back,” said Julia Coronado, chief economist for North America at BNP Paribas SA in New York and a former Fed board staff economist. “He has chosen to emphasize the conditionality of the baseline tapering forecast on data — and not just employment data but growth, inflation and importantly, financial conditions.”

The yield on the 10-year Treasury note fell four basis points, or 0.04 percentage point, to 2.49 percent as of 5 p.m. in New York. It touched 2.46 percent, the lowest since July 3. The Standard & Poor’s 500 Index climbed 0.3 percent to 1,680.91. Sustained Improvement

The 10-year yield rose as high as 2.74 percent this month from 1.93 percent on May 21, the day before Bernanke said […]

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