On July 21, Bernanke noted in his semi-annual testimony to Congress that while the Fed continues to plan for the eventual removal of policy accommodation, it would monitor ongoing financial and economic developments, noting that “we remain prepared to take further policy actions as needed to foster a return to full utilization of our nation’s productive potential in a context of price stability.” In response to questions, Bernanke stated that the Fed did not believe the double dip was a high probability event. He noted that while moderate growth remains the main scenario, in the event of a slowdown, further support from Fed policy could come in the form of additional unconventional policy measures, including changes in language regarding the targeted path of interest rates over time, changes in the interest rate on reserves and changes to the Fed’s balance sheet, including asset purchases. (See RGE CI: Fed Continues to Signal Caution; Prepared to Provide Stimulus if Growth Falters)
The MSCI Asia Pacific index closed at 115.67 after rising 0.2%.
The MSCI Asia Apex 50 gained 0.02% to close at 733.55.
The Japanese NIKKEI 225 lost 57.95 points or 0.62% to close at 9220.88. Officials in Japan continue to express concern over the yen’s strengthening. Since exports have been a catalyst for the Japanese recovery thus yen appreciation poses a threat to future growth.
In Hong Kong, the Hang Seng jumped 0.5%.
China’s Shanghai Composite rose 1.1% to close at 2562.46. This occurred as China reached an agreement with Hong Kong to ease the flexibility of yuan trading in Hong Kong. At the same time they were taking steps to internationalize the yuan, Fed Chairman Ben Bernanke stated that China’s handling of their currency served as a subsidy for exports.
The Indian SENSEX 30 climbed 0.76% or 135.92 points, to close at 18,113.15, its highest point since February of 2008. The financial sector showed gains in spite of concern that the Reserve Bank of India is likely to raise key interest rates.
In Australia, the S&P/ASX 200 fell 0.86%.
In Seoul, the KRX 100 slid 0.67% to close at 3,644.74. However, South Korea’s GDP grew 1.3% in the second-quarter according to a Bloomberg News survey. The official release for South Korea’s GDP growth is to come on July 26.
On currencies, the Aussie dollar gained 0.06 against the U.S. dollar while the kiwi, rupiah, and rupee weakened with respect to the U.S. Dollar. The yen and renminbi also strengthened against the U.S. Dollar.
Sovereign yields on 10-year bonds declined in Australia and Japan.
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