Wednesday, June 24, 2009

Follow-Up: US Dollar vs Foreign Currencies 6/24/09

There's something funny going on. US dollar spiked out of nowhere right after 12:00 PM EST, which I posted in the previous post. It spiked again higher after the Fed's FOMC statement was released, but ended the day at about the level of the first spike up.

So I decided to check other currencies, using ETFs for convenience. These are the intraday charts of US Dollar (UUP), Swiss Franc (FXF), Euro (FXE) (top row from the left), British Pound (FXB), Japanese Yen (FXY) and Canadian Dollar (FXC) (bottom row from the left). All foreign currencies dived at the same time US dollar spiked, and after some fluctuations they ended the day near the bottom of that initial spike down.

The forex market is for the professionals and large institutions, I was told. They seem to have known the result of the Fed meeting two hours in advance. The Fed kept the target rate (0 to 0.25%), and kept the commitment to buy Treasuries, agency bonds, and MBS but didn't increase (or decrease) the committed amount. Carry trades got unwinded?

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