Thursday, June 23, 2011

WSJ: Bernanke's Darker Outlook Sparks Fear Of Currency Volatility

By Neil Shah

NEW YORK -(Dow Jones)- Investors are bracing for bigger currency swings after Federal Reserve officials signaled they won't do more to help the sluggish U.S. economy, judging from bets in the foreign-exchange derivatives market.
On Thursday, a gauge of expected volatility in the options market rose for many major and emerging-nation currencies. A widely-watched measure of bearish bets on the euro, called the "risk reversal," hit 2.75 from 2.55 a day earlier. That's near its 2.85 peak in late 2008 after Lehman Brothers Holdings Inc.'s collapse sparked a global economic crisis.

Federal Reserve Chairman Ben Bernanke's comments on Wednesday "spooked the market," says Ashwath Venkataraman, global head of emerging-market foreign- exchange options at HSBC Holdings PLC in London. Bernanke indicated Fed officials aren't planning new steps to pump money into the financial system even though the U.S. recovery remains weak.

More Here..

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