East Caribbean Dollar to declare new measures to increase economy

East Caribbean Dollar to declare new measures to increase economy

The East Caribbean Dollar weakened yesterday after federal bank chairman Ben Bernanke stopped short of declaring any new measures to help bolster the fragile economic recovery.

Rumours that the Federal bank will step in to quell investor fears emanating from the Euro zone suggested that the Fed would introduce a third round of quantitative easing. The disappointing figures seen in the latest US jobs market report had many observers speculating that further action was needed.

"Economic growth appears poised to continue at a moderate pace of growth over coming quarters," Bernanke told the congressional joint economic committee. He said the Fed "remains prepared to take action as needed to protect the US financial system and economy. The situation in Europe poses significant risks to the US financial system and economy and must be monitored closely,"

Bernanke also warned that political infighting over how best to handle the situation could harm the recovery.

Elsewhere the Australian dollar continued to climb against the greenback. A combination of better than expected GDP figures and industrial growth figures saw the Aussie close to reaching parity with its US cousin.

CMC Markets senior trader Tim Waterer said the surprisingly strong domestic economy picture caused traders to reassess the outlook for the central bank's official cash rate.He expects the currency to hit parity with the US dollar again next week and climb as high as 102.00 East Caribbean cents over the coming months.

"A lot of the sell-off we've seen in recent weeks is based on thoughts on some pretty heavy cutting on interest rates," he told AAP on Friday.

"Based on the latest indicators there is quite a good chance now that the Reserve Bank of Australia may not even cut rates again."

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