US Dollar Plummets After Fed Rate Decision
March 18, 2009
Today saw the US interest rate decision take a back seat as the market eagerly anticipated details on degree of Quantitative easing we can expect the Fed to undertake. The accompanying statement noted that the Federal Reserve judges that the economy continues to contract since January’s meeting and therefore it judges rates to stay low for an extended period of time. They also suggest that they will use all available tools to promote the resumption of sustainable growth and price stability; however they did not specify when growth was likely to resume. With the regards to the level of quantitative easing the Fed informed the market of their intent to purchase a further $750bn of agency mortgage backed securities, an additional $100bn of agency debt and $300bn of longer term treasury securities. The action is now in line with the quantitative easing measures laid out by the Bank of England and Swiss National Bank. Immediately following the announcement the US Dollar was aggressively sold off with the USD index losing almost 3% of its value.