U.S. Dollar Has Third Biggest One-Day Decline Ever

The US Dollar index had its third biggest one-day decline yesterday since daily pricing began back in 1970. After the Fed announced that they will be purchasing US Treasuries and other assets, the Dollar fell sharply and ended the day down 2.69%.

As shown in the one-year chart below, the US Dollar index broke below its 50-day moving average Wednesday after breaking below its short-term uptrend a few days ago. The Dollar is still trading above its longer-term uptrend, but the technical damage done in recent days is not a good sign.

click to enlarge

Below we highlight all one-day declines of 2% or more for the US Dollar index, along with the percent change on the following day and over the following week. As shown, the average return over the next day and week has been -0.18% following these big down days in the past.

Comments

[Tradememe:]

The Fed is implementing the 1929 solution on the 2009 financial and economic crisis. For everybody's sake, let's hope it will work.

Mar 19 05:59 AM

[User 371080:]

$1Trillion additional debt heaped overnight on the already broken backs of the American taxpayer will hasten the collapse of the dollar.

While everyone focuses on the $300Billion for long-term Treasury bonds they appear to be ignoring the $750 billion for agency mortgage-backed securities.

news.xinhuanet.com/eng...

Mar 19 08:46 AM

[perki's:]

Given the size of the FOMC purchases combined with the recent stimulus legislation, the decline of the dollar is quite modest. I am surprised how well it is holding up.

Mar 19 08:56 AM

[Philip Gvinter:]

This is not new debt being put on the backs of American tax payers, this is new money being created and allowed to circulate throughout the economy. It is not free of consequences but it is not new debt.

Mar 19 09:05 AM

[User 371080:]

This money being "created" will eventually have to be paid in tax collected by the Treasury. Taxpayers are the ultimate guarantors of of US treasury debt. Play all the slight of hand and semantic games you want but your grandchildren will be paying these bills.


On Mar 19 09:05 AM Philip Gvinter wrote:

> This is not new debt being put on the backs of American tax payers,
> this is new money being created and allowed to circulate throughout
> the economy. It is not free of consequences but it is not new debt.

Mar 19 09:51 AM

[PassingBy55:]

The only price we're paying is inflation. We will feel these consequences long before our children do.


On Mar 19 09:51 AM User 371080 wrote:

> This money being "created" will eventually have to be paid in tax
> collected by the Treasury. Taxpayers are the ultimate guarantors
> of of US treasury debt. Play all the slight of hand and semantic
> games you want but your grandchildren will be paying these bills.
>

Mar 19 10:31 AM

[mac.barron:]

I don't want it to happen but I have a hard time trying to figure out a way that the dollar doesn't just fall off a cliff. I've been migrating my investments into gold and other currencies for a while now--worst case scenario I'll just come back here and reinvest. If you have not hedged yourself with some physical gold and taken at least some of you portfolios abroad there is still time left.

Mar 19 10:36 AM

[Andy Abraham:]

In these crisis times.. seems no one knows the answer... There are many things I have learned over all my years of trading...Have a plan...never invest more than 5% of your assets in any one particular idea... be flexible... believe anything can happen ( because it will)..and most importantly...Trend Follow... ( with a strong basis of risk management)...
Never met anyone who can predict any market..other than those on CNBC...

Mar 19 11:52 AM

[manya05:]

Why is it that as Helicopter Ben goes about doing his thing I cannot get Argentina 2001 out of my head? Like a fly buzzing around my head...I hope to be wrong..I hope it is nothing.

Mar 19 03:14 PM