The Fed's Loose Monetary Policy Crushes the Dollar

The 2:15 rate cut crushed the dollar.

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The dollar index broke through the record low set last Thursday as a result while Oil, gold and euros hit multi-year or record highs.

The trend of the dollar index for past two years:

The dollar index tracks the value of the dollar relative to a basket of six major world currencies: Euro, Yen, Pounds, Canadian, Swedish, and Swiss, in order of highest to lowest weights.

Although short-term interest rates fell as a result of the rate cut (notice the change from orange to green on the yield curve), long-term rates actually increased.

Most mortgages are priced based on the long-term rates. So, after the rate cut, things are looking worse for mortgage rates.

Finally, check out this article from January 4, 2001: Surprise Rate Cut Spurs U.S. Stocks.

Comments

[Uncle Bill]

How is this Seeking Alpha? You don't take a position, you just report old news. Dollar is at an all-time low, stock market is just off its all-time high. What should we do? Is the dollar going to rally while the stock market sinks? Has that ever happened? The market hasn't cared about a weak dollar to date -- is it suddenly going to start paying attention if the dollar drops lower? Answering any of these questions in an intelligent fashion might add to my Alpha. Otherwise, quit wasting my time.