The U.S. dollar made its high for the year in July. Since then the
greenback has cascaded lower, falling to an eight month low. Most of the
selling pressure was due to the Federal Reserve's ongoing extremely
accomodative and unprecedented monetary policies. However, there were
several periods of temporary strength when various Federal Reserve
officials hinted at a tapering of the Fed's quantitative easing program.
The greenback quickly fell on news that the Federal Open Market
Committee unexpectedly decided not to reduce their monetary stimulus at
their September 17-18 meeting. The FOMC at the conclusion of the policy
meeting said it needs to see more evidence that there is a sustained
economic recovery before it can reduce the pace of its asset purchases.
The Federal Reserve will continue to purchase a total of $85 billion of
Treasuries and mortgage-backed securities every month.
U.S. Dollar Index Futures -
Weekly Continuation
Chart provided by APEX
The
unchanged monetary policy came as a surprise to the market since it was
widely expected that the Fed would scale back their quantitative easing
program at that meeting. A Bloomberg poll that was released just before
the FOMC meeting showed economists thought the Federal Reserve would
taper their monthly bond purchases by between $5 billion to $10 billion,
or possibly even more.
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