US Dollar Mixed versus Major Currencies

In early morning trading today in Sydney, the U.S. Dollar remained mixed versus major currencies prior to the release of data on U.S. producer prices.  Economists expect this data to show that inflationary pressures persist in the United States economy.  Experts are divided about the Fed’s resolve to combat inflationary pressures at the time when the economy is almost, if not, in recession.

On Tuesday, at 00:25 GMT in Sydney, the U.S. Dollar traded at 106.11 Yen versus 106.18 Yen, while the Euro traded at $1.5896 compared to $1.5910. 

According to analysts, there is the perception that the Fed won’t aggressively fight inflation due to the current crisis in the financial sector.  If this happens, it could negatively impact the U.S. currency.

The market will be scrutinizing carefully the Federal Reserve Chairman’s testimony in Congress, where it is anticipated that he will be questioned on the direction of the credit crisis.  It is widely speculated that he may assure them that “things” are under “control.”  In the past, however, investors in the market have heard reassuring comments from both the Federal Reserve Chairman and Treasury officials.  For example, in mid-2006, when investors were reassured that the sub-prime crisis would be contained, when in reality, the crisis worsened.  Given that, much of Mr. Bernanke’s testimony will be taken with some skepticism.