FOREX: Weekly review

The dollar was in the spotlight last week as traders awaited guidance on US monetary policy from Ben Bernanke, chairman of the Federal Reserve.
Speculation that Mr Bernanke might use a speech at Jackson Hole, Wyoming, on Friday to signal a further round of US quantitative easing, QE3, weighed on the dollar early in the week.
Bernanke said the central bank still has tools to stimulate the economy without signaling when or whether policy makers might deploy them.
“The key point from the speech was that he didn’t signal any new Federal Reserve easing,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co..
Last year at the conference, Bernanke said the Fed would “do all that it can” to ensure a continuation of the economic recovery and that buying more debt might be warranted if growth slowed. Two months later, policy makers announced a $600 billion second round of asset purchases that ended in June.
Over the week, the dollar rose 0.2% to $1.4363 against the euro and was up 1.3% at $1.6238 against the pound.

The dollar also recovered from the record low of Y75.93 it hit against the yen on August 19, rising 0.6% over the week.
The yen weakened as the Japanese authorities made fresh attempts to rein in their currency, the strength of which threatens to derail Japan’s export-dominated economy.
On Wednesday, Japan’s Ministry of Finance unveiled a $100bn credit line for Japanese companies investing overseas and announced that the government would increase surveillance of speculative trading, which might require proprietary traders at Japanese banks to report daily positions until the end of September.
On Friday the Japan’s Prime Minister Naoto Kan said he was stepping down.
“I feel I’ve done everything I could under these difficult conditions,” Kan told Democratic Party of Japan lawmakers at a nationally televised meeting today.

The pound fell for a fourth day against the euro after a government report showed U.K. economic growth slowed in the second quarter, damping the case for the central bank to raise interest rates.
Sterling slipped for a third session versus the dollar as the Office for National Statistics said gross domestic product cooled to 0.2%, from 0.5% growth in the previous three months.
U.K. consumer confidence dropped to a three-month low in July, Nationwide Building Society said yesterday, fueling concern the economic recovery is faltering.
Bank of England policy maker Martin Weale said while he doesn’t see the need for the central bank to expand its 200-billion-pound bond-purchase plan, he would change his mind should the U.K. economy weaken “substantially,” the Yorkshire Post reported.
Britain’s currency depreciated 1.2% per euro last week, the most since the five days ended July 1. Sterling dropped 1.1% to yen, and was 0.3% weaker versus the dollar.