Will Bernanke Announce QE3? Will Dollar Decline?

The US dollar continued to rise today ahead of tomorrow’s speech of Federal Reserve Chairman Ben S. Bernanke, who is expected to announce a new round of quantitative easing. Some economists believe such expectations are futile.

Some market analysts argue that the North American economy doesn’t require additional stimulus as consumer prices continue to rise and the economic growth continues to accelerate, while deflation pressure wanes. Today’s report that showed the increase of unemployment claims from 412,000 to 417,000 doesn’t support such optimistic outlook.

The third round of the quantitative easing would weaken the dollar and that can, actually, be positive for the economy of the US. Martin Feldstein, economics professor in Harvard University, explained:

A lower dollar means more exports, and it also means a shift from consuming imported products to consuming goods and services that we produce in the United States.

EUR/USD fell from 1.4412 to 1.4374 as of 19:41 GMT today. GBP/USD slipped from 1.6372 to 1.6282. USD/JPY climbed from 76.97 to 77.55.

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