Fade Any U.S. Dollar/Japanese Yen Rally
Let's just admit that no one -- and that includes the Fed -- knows whether there will be a third round of quantitative easing. It is for this reason that the U.S. dollar has had an increasingly large reaction to every piece of good or bad U.S. data. Wednesday's FOMC minutes were a perfect example -- the Fed had nothing positive to say about the outlook for the U.S. economy, but the dollar strengthened on the mere fact that the Fed did not explicitly mention QE3.
Investors realize that the high level of unemployment will continue to be a challenge for the Fed and that all signs point to weaker growth, but QE3 is one of the few monetary policy tools still under the Fed's belt that could elicit a big reaction in currencies and equities. This is exactly the reason why the Fed has been so stingy by holding back more stimulus for as long as possible. The rally in the greenback and the U.S. dollar/Japanese yen (USD/JPY) currency pair in particular after the FOMC minutes tell us that the general market shares this belief....340 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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