Summers Withdrawal Weighs The Dollar Down
The dollar fell against the euro on Monday morning after news that the former Treasury Secretary Lawrence Summers dropped out of the race to become the new Federal Reserve Chairman in January. The euro traded at 1.3363 at 6:30 GMT on Monday morning.
Summers was recommended along with Fed Vice Chairman Janet Yellen as a candidate to take over when current Chairman Ben Bernanke's term ends on January 31. However, Bloomberg reported that Summers handed in a letter of resignation on Sunday, which the President has accepted.
The Federal Reserve is in the spotlight this week as investors are expecting the bank to reduce its asset purchases by $10 to $15 billion at the two day policy meeting which kicks off tomorrow. The benchmark interest rate is expected to remain unchanged this month, as policy makers promised to maintain the current rate until unemployment falls below 6.5 percent.
The euro is expected to face some pressure as European Central Bank President Mario Draghi speaks in Berlin on Monday afternoon. Most see Draghi reiterating his commitment to keeping interest rates low and maintaining accommodative policies for an extended period.
The euro was also weighed down by news that a small, radical political party may keep current Chancellor Angela Merkel's coalition from returning to power. The party, called the Alternative fuer Deutschland has climbed to four percent, just one percentage point from the support needed to enter parliament. The Alternative fuer Deutschland has called for Germany to lead the euro, and Merkel has already dismissed the idea of forming a coalition with the group after the election.
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