Olin’s MBA program named Program of the Year » Discussions


Unveil Reasons of USD Bounced up

  • Leader
    Sep 29
    The US Dollar Index bounced up by around 1% after releasing the
    minute of Federal Reserve Board on 19 Aug, breaking the record high
    since this March. The minute shows that the board tends to adopt more
    dovish approach in monetary policy. Yet, Why did the US Dollar Index
    make such a big bounce-up, driving those non-US dollar or even precious
    metal down?To get more news about https://www.wikifx.com, you can visit wikifx official website.

      According to the minute of Federal Reserve Board, some of the
    committee members of FOMC agreed to adopt the further easing monetary
    policy to cope with the negative impact bought by COVID-19; however,
    traders were disappointed and started to have short covering of USD
    immediately, driving USD rise a lot.





    I believe traders have already predicted and short USD ahead of
    releasing of minutes; and, they short cover the USD afterwards. It
    perfectly demonstrates the famous Wall Street‘s buying strategy – “Buy
    on rumor, sell on fact”. Meantime, the minute also reflects that the
    officers of the Board won’t set the upper limit or target return for US
    bonds to secure the position of USD. It drives those “extreme” dovish
    party disappointed and shows Federal Reserve Board has no further
    measures on easing monetary policy. Thats why some may interpret as the
    start of hawk signal instead of dove.
      I agree the Federal Reserve
    Board intends to adopt more dovish approach to pave the way for adopting
    further easing monetary policy in future. Since the minute keeps on
    telling negative towards economy, it drove both DJ index and Nasdaq
    index drop simultaneously after hitting the record high. With the
    divergence works between USD and stock; USD index, therefore, increases
    drastically after releasing of minutes.

      Many has talked about the huge short covering of USD, which showed the
    signal of bouncing up after touching the bottom. Whilst some said this
    is merely a technical adjustment and will have further drop afterwards. I
    do think the probability of both scenarios are equal; yet I realize USD
    dose not have much room for further drop, expecting a strong supporting
    level around 91.90. Two focusing events may affect the trend of USD -
    i/ the economic platforms of democratic party proposed by US president
    candidates Joe Biden and Kamala Devi Harris; ii/ the announcement of
    Jackson Hole in the Central Bank annual meeting and the market
    expectation - the new and innovative strategy of easing monetary policy
    by Powell, the chairman of Federal Reserve Board. If it turns negative
    and has no new ideas, USD index will be expected to boost up again.

      Technically, USD has a strong resistance level at around 94, with 3
    times strong selling signal recently, making USD index hard to have
    another breakthrough. It is estimated to be positive if USD index breaks
    the 94 level and takes this as the USD reference point.