Yellen’s nomination lifts US dollar
News that Janet Yellen will be nominated to head the US Federal Reserve lifted the dollar and soothed fears over the impact of a budget deadlock on Wednesday, though world shares fell for a third straight day. A White House official said US President Barack Obama picked Yellen, currently deputy chief at the Fed, to head the central bank. She is seen as keeping policy on broadly the same path as her predecessor Ben Bernanke, including maintaining the bank’s commitment to stimulus to keep economic recovery on track.
‘Cautious hand on the tiller’
“In the face of improving [economic] figures but looming uncertainty, markets can expect Janet Yellen to continue with a cautious hand on the tiller,” said Anne Richards, chief investment officer at Aberdeen Asset Management. However, many market participants expected the positive impact of Yellen’s nomination to be short-lived given the lack of progress to end political wrangling in Washington that could lead to a US debt default next week. Those worries sent European shares to a fresh one-month low on Wednesday, a day after a sharp selloff on Wall street saw the broad Standard & Poor’s 500 index shed 1.2 per cent, its biggest one-day drop in nearly six weeks.
Shutdown fears overshadow Yellen
European stocks wobbled on Wednesday as jitters over the US budget showdown offset news that President Barack Obama will nominate Janet Yellen to replace Federal Reserve chief Ben Bernanke. With only nine days left for Congress to act before an October 17 debt ceiling deadline, there has been little movement in the negotiating positions of President Barack Obama and Congressional Republicans. That has prompted some investors to take precautions against the possibility of a US default by shunning US debt maturing in late October and early November.
Charles Geisst, finance professor at Manhattan College and author of Wall Street: A History, said Bernanke’s successor would have some tough comparisons to live up to. The current Fed chairman has served since 2006 and was appointed by Obama’s predecessor George W Bush. He has been Fed chairman during some of the most turbulent economic periods in US history. “Bernanke will probably go down in history as the man who saved the world’s financial system,” said Geisst.
Women at the top are rare
Economists — and female economists in particular — were largely supportive of Janey Yellen’s nomination. Many emphasised that her accomplishments alone made her the best candidate for the job, not her gender. “At the highest levels of central banking, there are very few women,” Yellen said earlier this year. “But I am pleased that the representation of women is increasing a lot at other levels... I really think this is something that’s going to increase over time, and it’s time for that to happen.”