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After the QE2 Why the Dollar Fell Only Two Days By Lanbo Jiang

  in Business | Published 2012-01-13 23:47:45 | 163 Reads | Unrated


Months in the second round of the US

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Months in the second round of the U.S. Federal Reserve monetary policy of quantitative easing (QE2) the expectations, the foreign exchange market the dollar was a bearish voice. On the QE2's expected from August 2010 was about the use of the foreign exchange market, in September the Federal Reserve meeting on interest rates has been further confirmed by the. But in the November 3 as scheduled Fed meeting on interest rates announced the second round of the quantitative easing monetary policy, the dollar index was down only two days. In the November 5 U.S. non-farm employment data were published
, the dollar index to start the rally.

According to the Fed's initial plan, the monthly will buy 75 billion U.S. dollars of treasury bonds, the total preliminary purchase 6,000 billion. Accordance with the usual sense, the quantitative easing policy will increase the circulation of the dollar, real rate of return on dollar assets decreased, and therefore pressure the dollar index fell. The second round of the quantitative easing program, at least for 8 months, that has to continue until next June, the dollar index at least in the great falling after the announcement of bad news for a long time. But why the dollar index fell only two days it? This is because:

First, the Fed's policy of quantitative easing monetary scale, not to the "hysteria" of the state. Expected before the second round of the Fed to quantify the scale of 500 billion to 20,000 billion, but the Fed's initial plan only 6,000 billion U.S. dollars, slightly more than the minimum size expected a little higher. Even allowing for pre-purchase of government bonds maturing funds reinvested in bonds, it is only an additional 350 billion U.S. dollars, less than many had expected the level of 10,000 billion dollars. Therefore, 6,000 billion plan, can not be considered a bad way, after the announcement, the market for the message but have bad feeling its best.

Second, the final implementation of the Federal Reserve to quantify the scale of the policy may not have intended so much. November 3 in the Fed statement released after the meeting, said the following: "will buy 75 billion U.S. dollars per month long-term bonds, and buy bonds regularly assess the pace and scale, according to economic recovery, if necessary to adjust. "So the implication is that if the U.S. economic situation improved, the Fed may reduce the size of the purchase of government bonds. In the November 5 U.S. Department of Labor announced in October the U.S. unemployment rate and nonfarm payrolls data, the employment data show that in October 2010 a net increase of U.S. non-farm employment of 15.1 million, far higher than the predicted increase 6 million people, marking the largest increase since April, while August's data also made a positive correction. The Fed's policy of quantitative easing, it is because the United States from the employment situation worse, and now ushered in the secondary employment data, "haze" after the first "Sunny", and a net increase of 15 million non-farm employment data If the future can be sustained if the U.S. unemployment rate is expected to trend down there, so the future to quantify the scale of the Federal Reserve may be less than planned, the pressure of the dollar is much lighter.

Third, the dollar is still in the long-term uptrend line support region. U.S. dollar index from March 2008 met 70.698 outsole has, in fact, is gradually rising. The current anchor position in the vicinity of 76.00. Although last week the dollar index has reached over 75.631 near term, but as long as the dollar index to a solid future in between 75.00 ~ 77.00, then there is hope for a bottom, and once more able to stand in 79.00, the bottoms may be successful . Therefore, the dollar index bottomed might hold some optimism imagination.



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