U.S. Dollar in Forex Trading

228971 Resource 119247 120646 120646 1237473793466 1237473793466 Controlled Quantitative Easing: Is It Over for U.S. Dollar Strength in Forex Trading?

Greenback tanks on Fed Treasury plan

The Federal Reserve can't really lower interest rates any more -- they are already effectively at 0%. So the tool left to the Fed in an effort to increase liquidity and try to get the economy moving again is quantitative easing.  $1.25 trillion in new purchases The Fed is going on a shopping spree, <a href="http://www.fx360.com/commentary/kathy/857/the-weight-of-1-trillion-dollars.aspx?aid=5704" target="_blank" title="Fed Treasury plan, U.S. debt, national debt, U.S. dollar, forex trading, forex traders, safe haven currency">prepared to spend more than $1 trillion</a>. Here is a breakdown of the shopping list: <ul> <li>Mortgage backed securities: $750 billion</li> <li>Agency debt: $200 billion</li> <li>Long-term U.S. Treasuries: $300 billion</li> </ul> It's all about getting the money moving in an effort to stimulate the economy. But it brings up questions about funding this massive effort. More than <a href="http://www.bizzia.com/yieldingwealth/economic-stimulus-update-how-much-has-been-spent-on-bailouts/" target="_blank" title="Fed Treasury plan, U.S. debt, national debt, U.S. dollar, forex trading, forex traders, safe haven currency">$11 trillion has already been committed to economic stimulus</a> efforts so far, and things are starting to look a little scary. On top of concerns about funding this particular spending effort, there are additional concerns about who will continue to <a href="item/228747" target="_blank" title="Fed Treasury plan, U.S. debt, national debt, U.S. dollar, forex trading, forex traders, safe haven currency">hold U.S. Treasuries</a>. China is diversifying, and Japan may not want to keep holding onto U.S. assets that are increasingly diluted in value. GFT's Boris Schlossberg reports on the <a href="http://www.fx360.com/commentary/boris/860/is-quantitative-easing-the-death-knell-for-the-dollar.aspx?aid=5704" target="_blank" title="Fed Treasury plan, U.S. debt, national debt, U.S. dollar, forex trading, forex traders, safe haven currency, Boris Schlossberg">possibly positive outcome for the U.S. economy</a>: <blockquote> Fearing that US may not be able to attract enough foreign capital to finance the ambitious fiscal spending plans put in place, the Fed effectively made itself the buyer of last resort for US Treasuries. So far the gambit has worked with yields on the 10 year bonds dropping by nearly 50 basis points in one day. If the Fed can maintain US bonds yields at the current low levels, it would succeed in minimizing the cost of financing the massive US fiscal deficits and more importantly will be able to monetize most of the toxic debt in the US financial system without triggering serious inflation. </blockquote> U.S. dollar fundamentals Irregardless of whether the efforts at quantitative easing help the economy, things are in motion in terms of U.S. dollar strength. All of this debt and spending are resulting in weaker fundamentals for the U.S. dollar. These efforts may help restore confidence and risk appetite, but that just means that the greenback will no longer be wanted as a safe haven currency in forex trading -- that desire is already waning. Instead, forex traders will start looking at the fundamentals, and see lots and lots and lots of debt. And that means that the U.S. dollar may be weak for some time to come. Good thing <a href="item/228580" target="_blank" title="Fed Treasury plan, U.S. debt, national debt, U.S. dollar, forex trading, forex traders, safe haven currency, Boris Schlossberg">our leaders actually want a weak currency</a>... 9 application/xml false Boris Schlossberg Fed Treasury plan forex traders forex trading national debt safe haven currency U.S. debt U.S. dollar U.S. Dollar in Forex Trading Commentary, analysis and information for forex traders http://www.fx360.com/?aid=5704 Mozilla/5.0 (Macintosh; U; Intel Mac OS X 10.5; en-US; rv:1.9.0.7) Gecko/2009021906 Firefox/3.0.7 127.0.0.1 127.0.0.1 mmarquit 66.182.66.2 false true false false true 119247 blog blogsite/GFTForex/web