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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