Forex Blog: Currency Trading News & Analysis.

January 2nd 2009

Consensus: Fed is Devaluing Dollar

The Fed is officially in panic mode, having lowered its benchmark federal funds rate close to zero and exhausted all of the tools in its monetary arsenal, with one notable exception: its printing press. In other words, the Fed is trying to jumpstart credit markets by acting as a market participant- investing funds to compensate for the reticence of private investors. Capital markets are naturally enthusiastic about this policy, since some of the new cash will probably be used to make leveraged bets on asset prices and erase some of the losses of the last year. Forex markets are palpably less excited that the Fed has essentially eroded much of the impetus for foreigners to hold their ash in the US, with paltry short-term yields and long-term gains that will likely be offset by inflation. Unless foreign Central Banks follow suit

and eliminate the current interest rate disparity with the US, it could be a bumpy 2009 for the Dollar. Forbes reports:

Citi Analyst Steven Wieting opined: "If you want yield, you'll have to take some risk." With borrowing rates suddenly close to zero and the Fed saying it will keep them at “exceptionally low levels … for some time, you'll get as little of it from government-issued debt as possible."

Read More: After the Fed Panic 

SocialTwist Tell-a-Friend
Posted by Adam Kritzer | in Central Banks, US Dollar | 1 Comment »

Sponsored Offers

FREE Daily Email Updates

Enter your email address:

Delivered by FeedBurner

One Review of “Consensus: Fed is Devaluing Dollar”

  1. bowlan Says:

    they are intentuanly devaleing the dollar.
    crash the system so they can start over with a one world currency

Have Questions? Want to Share Your Review?

Be heard. Please share your reviews today!

Neighboring Posts

© 2004 - 2024 Forex Blog.org. Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.