Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

Continue Reading


Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

Continue Reading


Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

Continue Reading


RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

Continue Reading


China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading

Archive | November, 2016

New brooms sweep into the boardroom

Posted on 31 August 2012 by

Two of the hottest seats in the UK boardroom were filled this week. Pascal Soriot, vet-turned-Roche-executive, was named the new boss at AstraZeneca; while Antony Jenkins, the only credible internal candidate for the top job at Barclays, was anointed on Thursday.

In choosing Mr Soriot, AZ passed over the obvious internal candidate in the form of Simon Lowth, chief financial officer and interim chief executive of the troubled big pharma group, preferring someone distanced from the regime of David Brennan, who took early retirement in the face of shareholder frustration over strategy.

    At Barclays, the Libor-rigging scandal and associated £290m fines similarly created pressure to look outside the bank. A generally blameless career in retail and business banking was enough to make Mr Jenkins the replacement for Bob Diamond, whose investment bank had come to epitomise the unacceptable excesses of Bankerworld.

    Both insider and outsider are intended to act as new brooms. Each has a lot of sweeping to do. For Mr Soriot, the task is to set a coherent course for AZ.

    The group is facing a patent cliff crisis, with around half of its annual $33bn of revenues set to disappear by 2016 as drug patents expire. So far, it has faced this prospect with a mix of cost-cutting, share buybacks and modest acquisitions. This approach will not work with investors as the cliff-edge approaches. Mr Soriot must decide whether to return cash to shareholders or to spend more vigorously on buying the growth that the group’s drugs pipeline cannot deliver.

    Mr Soriot is likely to displease some investors whichever course he chooses. Mr Jenkins may end up pleasing no one. As well as dealing with the various inquiries into what Barclays has done wrong, he must restore the group’s reputation and improve its culture. Such nebulous targets may seem welcome because they are harder to miss. Yet the real-life downside is that their very vagueness can make it difficult to capture success.

    Moreover, Mr Jenkins’ lack of experience in Barclays’ investment bank – which dominates the group – is both a qualification for the job and a disadvantage. It is ominous that Barclays is already drawing attention to the investment banking credentials of its new chairman, Sir David Walker. A chairman’s knowledge is no substitute for expertise on the part of the chief executive.

    Mr Soriot’s task at AZ certainly looks clearer than Mr Jenkins’. He also has a relative advantage in the likely response of shareholders. Both groups are trading at discounts to peers but over the past five years total shareholder return for AZ investors has been about 60 per cent, while the value of Barclays shareholders’ investments over the same period have shrunk by a similar percentage.

    Gratitude is not invariably a feature of investor behaviour. But value creation rather than destruction is at least a more promising backdrop for a group seeking a fresh start.

    India’s banks face balance sheet decline

    Posted on 31 August 2012 by

    The term “lazy banking” has dogged Indian financial services for the past decade since a senior regulator used it to describe an industry dominated by lumbering, risk-averse, state-backed institutions.

    Yet many of these same banks have begun lending much more energetically, heightening concerns among regulators and analysts about weak risk management and declining asset quality in Asia’s third-largest economy.

      Worse, with Indian industry unusually dependent on bank capital to fund investment, looming signs of trouble at the public sector lenders are likely to place new constraints on the corporate sector – and on the government as it struggles to restore growth to the 8 per cent level enjoyed in recent years.

      “The deterioration in bank balance sheets now makes the situation more troublesome than even in 2008,” says Ananda Bhoumik, a director at Fitch Ratings India.

      Banking woes spilled on to India’s streets in August as a two-day strike closed thousands of branches amid union complaints about legislative changes that could increase competition in the sector.

      But analysts have been more worried about a sharp increase in gross non-performing assets, which rose from 2 per cent a year ago to 3.4 per cent at the end of the last quarter. Debt restructuring between lenders and borrowers is on the rise, too – zooming up threefold in the past year to Rs680bn ($12bn) – raising analysts’ suspicions that banks are using these agreements to fudge the true level of their bad debts.

      On Thursday, Crisil, the Indian rating agency, sharply increased its projections for restructured loans next year, citing “significantly higher funding challenges being faced by companies with large debt” in sectors such as infrastructure and construction. It said total debt restructuring will rise to Rs3.25tn, about two-thirds higher than previous estimates.

      Both trends are partly cyclical, as corporate credit quality drops in the face of slowing growth, high interest rates and rising input costs. However, there is also evidence of a structural change, with sharp increases in the concentration of bank exposure to the debts of a group of large corporates.

      India’s banks have enjoyed an annual compound growth rate of about 20 per cent over the past five years, but this has increasingly been driven by a fivefold debt increase at just 10 large conglomerates, including Adani, Essar, Vedanta and billionaire Anil Ambani’s Reliance Group, according to Credit Suisse.

      India’s state-backed banks, which account for about three-quarters of lending, have borne the brunt of this balance sheet deterioration with all four of the largest groups reporting weaker asset quality in the last quarter.

      State Bank of India, the nation’s largest bank by market share, is performing especially badly: its gross non-performing assets jumped to Rs470bn, nearly twice the amount for the same period the year before – an increase that its management admitted had caught it by surprise.

      But with India’s economy weakening – putting sectors such as telecoms and airlines under stress and adding to worries about exposure to over-leveraged industrial groups – analysts suggest pressure will start to increase on larger private banks, including ICICI and Axis Bank.

      “The next phase of this credit cycle will see large corporates come under greater pressure, with restructuring set to rise further,” says Anish Tawakley, a banking analyst at Barclays in Mumbai, “and, here, many of the private banks are just as exposed.”

      Such trends have regulators worried. In a stinging speech this month, KC Chakrabarty, the most outspoken of the Reserve Bank of India’s four deputy governors, attacked public sector banks in particular for weak risk management and inappropriate use of restructuring agreements.

      “Clearly, there is cause for concern given the pace and quantum of restructuring over the past few years,” he said.

      Few analysts think the solvency problems lurking in India’s corporate sector will turn into a full blown liquidity crisis in the near future. But if current trends continue, India’s government will soon need to inject fresh capital into its public lenders, while private banks will have to seek new funding from wary markets.

      Capital tied up in restructured loans, meanwhile, will not be available to lend elsewhere, hobbling an economy that badly needs funds to restart investment and increase infrastructure spending.

      “The banks need to call a spade a spade when there is a problem,” says Rana Kapoor, chief executive of Yes Bank, a fast-growing private outfit launched eight years ago. “But, in the end, the public banks are the white knights here, and there is no doubt they will be working to overcome the current stresses by more restructuring.”

      Taiwan banks to clear renminbi transactions

      Posted on 31 August 2012 by

      Beijing’s attempt to make the renminbi a global currency took a step forward on Friday with an agreement that will let banks in Taiwan clear transactions in the Chinese currency.

      Establishing Taiwan as an offshore centre for renminbi transactions further cements the growing integration of the two economies while leaving to one side the unresolved issue of the island’s sovereignty.

        Taiwan is a much smaller financial center than Singapore or London – which are also vying to become offshore renminbi centres – but its vast trade ties with China give it a major advantage.

        This agreement is the latest in a long string of economic and trade pacts that have drawn Taiwan increasingly closer to China, including a major free trade deal signed in 2010. China is now Taiwan’s largest trade partner.

        Although the two have historically been antagonists and Beijing regards the island as a renegade province, relations have warmed since the election of Taiwan’s current president, Ma Ying-jeou, in 2008.

        Personal interactions between the two sides have also grown steadily. Chinese students have recently been allowed to enrol in Taiwanese universities, meaning some students are beginning to learn about cross-strait relations from Taiwanese professors. China has also begun letting its citizens visit Taiwan en masse, and more than 2m of its tourists are expected in Taiwan this year, up from 300,000 in 2008.

        The renminbi agreement makes Taiwan the second major market after Hong Kong able to clear the renminbi. “We’re not talking about getting a lot of business in one day … but the opportunity we see is actually quite huge,” said Jerry Yang, a banking analyst with Daiwa.

        It caps a summer of busy cross-strait activity in the financial sector. Bank of Communications and Bank of China both opened branches in Taipei this summer, making them the first Chinese banks to establish commercial operations in Taiwan. Bank of Taiwan and Mega Bank, the leading Taiwanese bank for foreign exchange, went the other way across the Strait of Taiwan to open mainland branches.

        Many of the details of the agreement have not yet been settled, including which banks on each side will handle the clearing, but Taiwan is expected to establish an interbank and spot market for the renminbi to be known as CNT, in line with Hong Kong’s offshore CNH market.

        Taiwan’s central bank said the clearing agreement would take effect in 60 days, but analysts predict the new market will not develop as quickly as it did in Hong Kong. Political relations between Taipei and Beijing remain complex, and demand for the renminbi is more tepid now than when Hong Kong opened for business.

        “The availability of CNT might create a bit of excitement domestically but the current worsening and uncertain China economic outlook may dampen the investment rush or fast-pace accumulation of CNT for now,” wrote Wee-Khoon Chong, a rates analyst with Société Générale, in a note.

        Taiwanese regulators have also not yet indicated what kind of local renminbi products, such as offshore bonds, will be allowed, raising questions about what banks will do with their local renminbi deposits, said Steven Lam, an analyst with Keefe, Bruyette Woods.

        In the first half of this year, total trade between Taiwan and China was US$59.5bn, according to Taiwanese government statistics. Given how quickly the renminbi has been adopted in other markets for trade, trade settlement between the two sides of the strait could reach US$12bn a year, estimated Raymond Yeung, an economist with ANZ.

        Donna Kwok, an economist with HSBC, said the agreement with Taiwan offered hope to Singapore and London. It “is a sign of things to come and other offshore renminbi centres will also eventually come to fruition,” she wrote in a note. Singapore has said Beijing will soon authorise one of its banks as a clearing bank.

        Fed should save QE3 for real emergency

        Posted on 31 August 2012 by

        There are moments for action and then for displaying reserve.

        Now is the time for the Federal Reserve to wait, rather than give markets another dose of monetary stimulus via a new round of quantitative easing, or QE3, in the coming weeks.

          Additional bond purchases appear likely at some point soon, after Ben Bernanke told central bankers at their annual gathering in Jackson Hole that he would not rule out further asset purchases should economic conditions warrant such a move.

          While renewed easing could take other forms, including the Fed extending its near-zero interest rate policy beyond the end of 2014 or cutting the present 25 basis
          points it pays on reserves held by banks at the Fed, investors clearly desire more bond purchases.

          The S&P 500 has risen some 10 per cent from its low in June in a classic “risk-on” rally that reflects hopes of pump-priming, with investors ignoring muddling data and slowing corporate earnings.

          Commodities, led by gold, have also risen smartly over the summer against a steady drumbeat of QE3 chatter. Investors, notably Bill Gross of Pimco, have laid their cards on the table and for good reason.

          Before the Federal Open Market Committee concludes its two-day policy meeting on September 13, officials will have had time to analyse the August jobs data due at the end of next week.

          Economists expect employment gains around 125,000, below the year-to-date average of 151,000 – hardly a story of vigour.

          That will stoke market hopes of QE3; as the FOMC meeting minutes from August noted: “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.”

          Based on the tone of economic data since the Fed last met, it is thus logical to assume QE3 will launch in September.

          Such a policy response, however, is highly questionable in terms of what it may achieve.

          Prior rounds of QE were undertaken when the threat of recession and deflation were manifest. That is not the case at the present time.

          For example, a key bond market measure of inflation expectations monitored by the Fed has been rising this summer and sits around 2.75 per cent.

          As a point of reference, inflation expectations in August 2010 and last September were heading below 2 per cent, providing justifiable grounds for launching QE2 and Operation Twist.

          With Twist running until the end of the year, long-term Treasury yields remain very low. Moreover, the recent historic lows in corporate bonds suggest that Fed policy has achieved its aim of pushing investors out of Treasuries and into riskier assets, allowing companies and homeowners to borrow at record low rates.

          Indeed, there are encouraging signs that the housing market has recently stabilised as consumers with solid credit standing have been refinancing or negotiating new 30-year fixed-rate mortgages below 4 per cent.

          True, low rates have not helped many who actually need such a boost, but another round of QE will hardly alter that dynamic.

          While the sluggish US recovery is challenging for some members of the FOMC, there are strong grounds for not unveiling QE3 now.

          For all the grumbling over stubbornly elevated unemployment, bigger battles potentially loom for policymakers; namely the risk of a eurozone break-up and Washington tumbling over its fiscal cliff.

          Indeed, a notable absentee from Jackson Hole is Mario Draghi, as the European Central Bank chief decided at the last minute that his presence was required at home and not hiking up mountains and discussing arcane aspects of monetary policy.

          As September beckons, the focus of global investors will rest uneasily on the eurozone, with the ECB and not the Fed the most important central bank at
          this juncture.

          In terms of the fiscal cliff of automatic spending cuts and repeal of Bush-era tax cuts that would possibly push the US economy into a recession next year,
          investors generally expect Washington will strike a deal after the elections in November.

          But there is a risk the process could drag into 2013, weighing on the economy and confidence against the backdrop of either China’s slowdown or the eurozone crisis potentially taking a turn for the worse.

          For the Fed, better to hold fire and use the QE3 bullet for a real emergency.

          UK house prices record surprise increase

          Posted on 31 August 2012 by

          UK house prices made a surprise leap in August, with average prices rising 1.3 per cent, the biggest monthly increase since January 2010.

          The increase reverses the decline recorded in July when prices fell 0.8 per cent, according to the Nationwide House Price Index.

            But the lender, which described August’s rebound as “a little surprising”, warned against reading too much into one month’s data.

            The three-month measure of prices show a fall of 0.5 per cent, while annual figures recorded a decline of 0.7 per cent – albeit an improvement from year-on-year falls of 2.6 per cent in July.

            Experts believe the three-month figure typically shows the clearest indication of market trends as it smooths out the monthly volatility caused by the small number of monthly transactions used to calculate house price indices.

            Robert Gardner, chief economist at Nationwide, said the improvement of annual house price falls provided evidence that conditions remained “fairly stable”.

            “This may be explained by the surprising resilience evident in the UK labour market, with further increases in employment in recent months, even though the UK economy has remained in recession,” said Mr Gardner.

            Nationwide said it expected the housing market to remain stable over the next two years.

            On Thursday, new data revealed that mortgage lending recovered in July from an 18-month low in June. Figures from the Bank of England showed that mortgage approvals rose in July – from 44,124 to 47,312. However, experts warned that the increases were modest and pointed to a weak underlying market.

            French banks lead Europe stock advance

            Posted on 31 August 2012 by

            French companies were among the best performing stocks on the FTSE Eurofirst on Friday morning.

            , the mobile phone operator owned by billionaire Xavier Niel, led the rally on the Europe-wide index.

              Shares rallied 5 per cent to €126.65 after the group announced better-than-expected first half sales and operating profit. News that Free Mobile, its recently launched low-cost wireless operator, had signed 3.6m customers in the first half of this year helped to sustain the rally.

              Crédit Agricole
              also made strong gains. On Tuesday, chief executive Jean-Paul Chifflet pledged to offload Emporiki, its Greek subsidiary, and said a deal could be signed “in a matter of weeks”.

              France’s third largest bank by market value has taken a blow from its exposure to weaker eurozone countries and is in the process of trying to sell Emporiki.

              Shares climbed 5.3 per cent to €4.54.

              France’s benchmark CAC 40 surged 1.4 per cent to 3,424.87.

              The wider FTSE Eurofirst 300 gained 0.7 per cent to 1,085.81, despite news that unemployment across the eurozone remained 11.3 per cent in July, compared with 10.1 per cent this time last year.

              With volumes still at multi-month lows, traders in the market kept indices buoyant on hopes that Ben Bernanke, US Fed chairman would indicate another round of quantitative easing was in the works. He is due to address central bankers from around the world at an annual gathering at Jackson Hole, Wyoming this afternoon at 3pm.

              Hopes for more quantitative easing were reflected in the share price of several banks across Europe. Shares in Deutsche Bank climbed 3.4 per cent to €27.88, while Italian lender Intesa Sanpaolo rallied 3.5 per cent to €1.24.

              French lender Société Générale
              also made strong gains on news it was in talks to sell a majority holding in Qatar National Bank, its Egyptian subsidiary. The news yesterday came a day after it said it was preparing to sell its Greek subsidiary Geniki

              The Xetra Dax rose 1.3 per cent to 6,985.58, while Italian and Spanish stocks outpaced their peers with the FTSE MIB ralling 1.9 per cent to 15,062.05 and the Ibex 35 climbing 1.7 per cent to 7,314.4.

              Weidmann considered quitting, Bild says

              Posted on 31 August 2012 by

              The president of the Bundesbank considered resigning in a show of discontent over ECB plans to intervene in sovereign debt markets, a German publication has reported. Jens Weidmann was dissuaded by senior figures in the government, according to Bild newspaper.

              The Bundesbank declined to comment on the report, which comes as the ECB drafts a plan to purchase sovereign debt to drive down borrowing costs for eurozone member states such as Spain.

                Mr Weidmann has repeatedly made clear that he has deep misgivings about the ECB’s determination to press ahead with a scheme. Details of how the ECB might intervene – subject to struggling borrowers making official requests for EU help – are expected to be revealed next week by Mario Draghi, ECB president.

                While the Bundesbank is the most powerful and global national central bank in the eurozone – by virtue of the size of the German economy and its record in maintaining a strong currency in the pre-eurozone era – it cannot veto proposals put to the ECB’s governing council, where all national central banks wield just one vote.

                But Bundesbank opposition is a factor that may complicate Mr Draghi’s efforts to construct a bond-buying scheme that convinces financial markets of the strength of the ECB’s resolve. Mr Draghi said last month he would do “whatever it takes” to keep the eurozone intact.

                A German government spokesman said Angela Merkel, chancellor, supported Mr Weidmann and believed he should have “as much influence as possible” at the ECB.

                In an interview published last week by Spiegel, the German magazine, Mr Weidmann denied he would end up resigning, saying “[I could] carry out my duty best if I remain in office”.

                He “knew the situation that awaited me” when moving to the Bundesbank – and thus to the ECB’s governing council – last year, Mr Weidmann said.

                Mr Weidmann’s predecessor, Axel Weber – now chairman of UBS – quit the post last year owing in part to his longstanding discomfort at the ECB’s initial decision to embark on bond purchases in 2010. Also, last year Jürgen Stark, a former Bundesbanker and an executive board member at the ECB, also resigned. He said this month it was a protest at the ECB’s crisis management, in which he said the central bank had “repeatedly crossed red lines”.

                The report of Mr Weidmann’s dilemma over resigning follows a call by Jörg Asmussen, a senior ECB official, for the International Monetary Fund to take part in overseeing reforms made by eurozone countries that request financial help.

                His call reinforces the idea that the central bank will insist on governments living up to reform pledges before it intervenes to purchase their sovereign bonds.

                “From my point of view this means that the IMF will be involved in setting the economic adjustment programmes because the IMF of course has unique knowhow and has high leverage as an external policeman in these cases,” Mr Asmussen said in a speech in Potstdam.

                Eurozone jobless total reaches fresh high

                Posted on 31 August 2012 by

                Eurozone unemployment hit a fresh high in July, while inflation increased more than expected, a mix that could make it harder for policy makers to take decisive measures to restore business confidence and boost economic growth.

                Unemployment in the 17-country euro area was 11.3 per cent, or 18m, in July, the highest since the launch of Europe’s monetary union in 1999, according to Eurostat, the EU’s statistical office. Joblessness among the under-25s was 22.6 per cent.

                  The overall number of people without a job in July compared with a year ago increased by 2m, a steep rise that indicated how tough austerity measures were taking a toll on economic growth – the eurozone edged closer to recession in the last quarter and consumer confidence was at record lows.

                  “The critical unemployment situation demonstrates the need to tackle the root causes of the current economic crisis head-on, giving priority to job creation,” said László Andor, the EU’s social affairs commissioner.

                  “Youth unemployment is of particular concern as it … poses a serious threat to social cohesion. EU institutions and governments, businesses and social partners at all levels need to do all they can to avoid a ‘lost generation’,” he said.

                  The worst hit was Spain with 25.1 per cent of its workers population out of a job – and a staggering 52.9 per cent under-25s unemployment rate – followed by Greece with 23.1 per cent, although the latest figure was for May.

                  Among the three largest eurozone economies German and Italian unemployment remained steady at 5.5 per cent and 10.1 per cent, respectively, while in France the number of jobless crept up 10 basis points to 10.3 per cent.

                  “The North-South divide is still there: in Germany, unemployment is lower than a year ago, whereas it has increased markedly in Italy, Spain, Portugal and Greece. But more and more countries are affected by the economic slowdown,” said Jean Pisani-Ferry, an economist who heads the Brussels-based Bruegel think-tank.

                  The employment data was followed by more bad news, as inflation rose to 2.6 per cent in August, compared with 2.4 per cent a month earlier, according to “flash” data released by Eurostat.

                  The persistent rise in unemployment, coupled with slowing growth and plummeting industrial output would usually lead the central bank to take measures to stimulate the economy. But with inflation picking up again because of rising commodity prices, the central bank may be reluctant to cut interest rates next month.

                  However, several economists said there was enough evidence that consumer prices would ease in the coming months, giving the European Central Bank greater leeway to act promptly.

                  “Inflation should resume its downward trend over the remainder of the year and will not be enough on its own to prevent the ECB from adopting additional measures to support the economy either next week or soon after,” Ben May, eurozone economist at Capital Economics, said.

                  Nomura plans further $1bn in cost cuts

                  Posted on 31 August 2012 by

                  Nomura is to cut more jobs as it seeks to trim a further $1bn in costs from its struggling investment banking division.

                  Koji Nagai, who was named president of the Japanese lender in a management shake-up last month, announced the cuts at an internal meeting on Friday, according to company officials who attended.

                    Nomura is trying to restore its reputation after an insider-trading scandal and stem losses at its global wholesale investment bank, built on the acquired Asian and European operations of Lehman Brothers.

                    The wholesale division lost Y8.6bn ($110m) in the quarter to June, helping drag Nomura’s overall net profit down by 90 per cent.

                    The cost-cutting plan disclosed on Friday represents the second major retrenchment at the division in a year, following $1bn in reductions that began late last year. Nomura is to announce more details next Thursday, but the biggest impact is expected to be on jobs outside Japan, where the bank’s losses have been deepest.

                    Mr Nagai told Nomura managers he hopes the restructuring will allow the wholesale division to earn Y125bn of pre-tax profits by the fiscal year ending in March 2016, of which Y50bn would be earned outside Japan. For the group as a whole, which included a large domestic retail brokerage, Mr Nagai set a profit target of Y250bn.

                    Yen at week-high as haven demand grows

                    Posted on 31 August 2012 by

                    The Japanese yen hit its strongest level all week on Friday morning ahead of a keenly awaited speech by Ben Bernanke, Federal Reserve chairman, that was expected to give an indication of whether the US would embark on a further round of monetary easing.

                    The dollar fell 0.2 per cent against the yen to touch a weekly low of Y78.39 amid haven demand in Asia, after figures revealed an unexpected drop in industrial production in Japan last month, raising concerns over the health of the economy.

                      Elsewhere, currency markets remained on hold after a week of thin trading ahead of the annual conference of central bankers in Jackson Hole, Wyoming, with Mr Bernanke expected to speak at 3pm BST.

                      But other major currencies were flat against the US currency, with the euro less than 0.1 per cent higher at $1.2513 and the pound flat at $1.5784.

                      Many forex analysts were expecting the dollar to weaken on any clear signs the Federal Reserve intended to inject more monetary easing into the US economy in the autumn.

                      “What seems clear is that the Fed is fearful that weak consumer and business confidence is keeping the economy close to ‘stall-speed’ and that disappointing asset markets today would be counterproductive,” said Chris Turner, analyst at ING.

                      “By keeping most options open, including QE, we expect the dollar to face downside risks today.”

                      However, other analysts warned it could be unlikely Mr Bernanke would give any concrete indications of the Fed’s plans, with further uncertainty likely to send the dollar higher.

                      Analysts at Citigroup said: “The majority of investors do not seem to expect concrete indications that the Fed will do QE3 or some alternative policy any time soon. This should be less supportive for market risk sentiment and positive for the dollar. What seems to be fuelling the resilience of risk-correlated currencies and the euro may be the small but positive chance that Bernanke actually signals aggressive accommodation ahead.”

                      Meanwhile, analysts were also warning that the weaker signs on the Japanese economy could force the Bank of Japan to act to stop the stronger yen doing further damage.

                      “There is a danger now that with the European Central Bank, Fed, Bank of England and other central banks upping their degree of monetary easing that the yen strengthens without a response from the BoJ,” said Derek Halpenny at Bank of Tokyo-Mitsubishi, which expects the BoJ to implement further monetary easing as a result.