You have to hand it to Ben Bernanke. For a mild-mannered economics professor the guy has stones. Nothing was left in reserve as he unloaded his monetary arsenal in dramatic fashion today. One observer called it “shock and awe”. That just about covers it.The Fed left nothing to chance in its statement and laid out exactly how they will proceed in the foreseeable future.
The dollar will take time to adjust to this new reality. When Japan instituted quantitative ease earlier this decade the yen fell at first before recovering after a few months. The US is not a net exporter of capital like Japan, so the dollar may not hold up as well as the Yen did in 2001, but my guess is that over the medium-term the dollar will hold its own. During the next few weeks though, do not stand in front of the freight train. A rebound a high as 1.4800 could unfold before year-end.
