Archived IMT (2009.10.19)

FX TRADERS SWIFLTLY CONCLUDE THAT NO EXIT STRATEGY IS POSSIBLE after hearing BERNANKE speak. Bernanke said that adopting a FISCAL strategy (responsibility of the US Treasury NOT the Fed) " is critically important in order to maintaining confidence in our economy and confidence in our currency". While the Fed has made it clear it would NOT be exiting its MONETARY policy strategy any time soon (despite much talk on when it would be appropriate to do so), it has now vocally placed the onus on the Treasury as far as fiscal policy is concerned. Currency traders hearing such remarks would quickly conclude that an exit strategy from NEITHER fiscal nor monetary stimuli is likely soon, which only empowers them to sell the dollar further--especially as earnings catapult stocks and risk appetite higher. EURUSD hit $1.4980, NZDUSD surged to 0.7575 and AUDUSD retests 0.93. Meanwhile, French Fin Min Lagarde digs deep in her purse of FX rhetoric designed to contain euro strength, by saying the Eurozone needs a strong dollar and that the Eurozone finance ministers have jointly reiterated the issue at todays Econfin meeting. Lagarde also used the policy element by estimating that no exit strategy would be pursued until 2011 when the situation in terms of growth stabilizes.