By: Barbara Zigah

The U.S. Dollar was party to a major sell-off yesterday following the Federal Reserve Bank Chairman’s testimony to the U.S. Congress. Ben Bernanke made it quite clear that the continued and prolonged sluggishness of the U.S. economy could warrant further stimulus and that the Federal Reserve is ready to provide it as and when they deem it necessary. The ongoing crisis over the U.S. debt ceiling also spurred some panic selling, as Moody’s credit rating agency warned that unless agreement is soon reached, the country’s sterling credit rating could be in jeopardy. The fear is that without raising the limit before the deadline, default is imminent.

The beleaguered Euro benefited significantly from the Dollar sell-off, with EUR/USD surging to $1.4228, a gain of nearly 3% from the 4-month trough struck earlier this week. Other commodity linked currencies also did well against the greenback, especially the New Zealand Dollar. The Kiwi traded up to a high of $0.8508, a 30-year record high before settling back to $0.8455, still a 0.6% gain on the day.

The safe haven Swiss Franc was the big currency winner, striking new record peaks against both the U.S. Dollar and the common currency Euro. The U.S. Dollar slipped to a low of 0.8080 Swiss Francs, before edging back to 0.8122 Swiss Francs, still 0.8% below late New York trading levels, while the Euro dropped to 1.1494 Swiss Francs before edging higher to around 1.1550 Swiss Francs.