The big news of course, in a week of big news, was the withdrawal of former Treasury Secretary Larry Summers for the top job at the Fed when Ben Bernanke leaves in February. Vice chair Janet Yellen, a policy dove, is now the front runner for the top Fed post. Yellen has had a long career in the Fed system and also chaired the White House Council of Economic Advisers under U.S. President Bill Clinton and would be the first woman to lead the U.S. central bank. Still, there are apparently other candidates such as former Vice Chairman Donald Kohn, who retired in 2010 after 40 years at the Fed and Roger Ferguson, who was vice chairman from 1999-2006 and is currently chief executive of the academic retirement fund TIAA-CREF.
The dollar fell on the Summers news in Monday trading after it had climbed last Friday on a Nikkei report that Summers was about to be named to the post. Summers cited the good of the nation and the knowledge that his nomination would be acrimonious and not good for the White House as reasons for not wanting the job. With the dollar taking a hit in the short term, U.S. President Barack Obama should now just name his candidate and while the market may not like Yellen as much as Summers today by next week, given all the other pressures facing the Fed and the U.S. economy and the debate over tapering, investors will be more than happy. Delaying only increases the risk that investors being to wonder what problem Obama has with Yellen. The drop Monday may not have been so much on the more hawkish Summers pulling his name from the ring as the uncertainty in a critical week for the Fed. Naming Yellen would at least create certainty and ensure continuity after Bernanke has gone.
For Summers it was probably a good move. He doesn't get bruised in a confirmation fist fight and can work his way forward when the chair sits vacant again.