Fed Move Slaughters Dollar
Mar 19th, 2009 | By Doug Casey | Category: Financial NewsIn the currency market, the dollar plummeted against the euro after the Fed spoke. Late Wednesday, the euro was trading at $1.3485 vs. $1.3013 on Tuesday.
The buck was obviously hammered by traders who didn’t care for the Fed’s monetization move.
It “was taken to the woodshed and beaten like a dog. And after a short rest, beaten like a dog again,” wrote David Watt, senior currency strategist at RBC Capital Markets. “Market sentiment on the Fed’s maneuver was crystal clear.”
Marketwatch.com wrote of the decision that, “Quantitative monetary easing policy carries out monetary easing by using money supply rather than interest rates as its main tool. The benefit of this policy is that more funds can be supplied, even after official rates fall to zero, thereby expanding monetary easing further. The Bank of England, the Bank of Japan and the Swiss National Bank have all adopted it to varying degrees, putting pressure on their respective currencies.”
Marc Chandler, of Brown Brothers Harriman, took a look at both sides of the coin, writing that, “The key consideration might be that quantitative ease is currency-negative — as it was for sterling, yen and Swiss franc.
“However,” Chandler added, “an alternative explanation is that with today’s move the Fed has finally gotten ahead of the curve and this will boost confidence of a recovery later this year.” Maybe. But in its statement, the Fed removed language saying they expected the economy to recover later this year.
Almost lost in the shuffle, the Labor Department reported that the consumer price index gained 0.4% in February, the second monthly increase in a row and the largest since last July. It exceeded economists’ projections by 0.1%.
Source: Fed Move Slaughters Dollar
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.