Euro Gains As Bernanke Says QE3 May Yet Happen

Posted: July 13, 2011 in US News, World News

Dawn Kissi
July 13, 2011

NEW YORK (Dow Jones)–The euro climbed against the dollar Wednesday after Federal Reserve Chairman Ben Bernanke said another round of quantitative easing may yet be needed, should the U.S. economy remain weak. The single currency also gained on news that Fitch Ratings expects Italy to successfully implement a deficit-reduction plan.

Stronger demand for riskier assets also put a dent in the dollar, diminishing its safe-haven appeal. While the euro began to recover on the absence of more negative euro-zone news, the dollar set a record low against the safe-haven Swiss franc.

“Fed Chairman Ben Bernanke has made it plain to the world that the Fed is not ready to put the U.S. economy’s crutches back in the closet,” Douglas Borthwick, managing director with Faros Trading, said. “Saying the economy still requires a good deal of support, the chairman is making it plain that QE3 is still on the Fed’s mind and is on the table.”

During his semiannual congressional testimony, Bernanke acknowledged that the pace of the economic recovery has remained soft, and that the Fed might yet be prepared to embark on yet another round of quantitative easing (QE3) to jumpstart the economy.

Although appetite for higher-yielding assets was the main storyline of early trading, traders said that beneath the surface, investors were still nervous about Europe’s debt crisis. That underlying sentiment has helped support safe havens such as gold, which also set a record Wednesday.

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