Fed Turns on Printing Presses, Dollar Crashes

Having already lowered interest rates essentially to zero, the Fed has announced that it will now focus on ‘quantitative easing,’ a fancy way of saying that it intends to turn on the printing presses. It will purchase over $1 Trillion in credit instruments, split between Treasury securities and Mortgage-backed debt, expanding its balance sheet to $3 Trillion. This should (temporarily) put an end to speculation over whether foreign Central

Swiss Bank Fulfills Promise of Forex Intervention, Franc Collapses

Last week, the Forex Blog concluded a post on the Swiss Franc by suggesting that the Swiss National Bank (SNB) could artificially depress the value of its currency, which had “not just posted strong gains against the euro since late August but has gained 8% on a trade weighted basis.”
The very next day, the SNB followed its widely anticipated rate cut by announcing that it would indeed

Swiss Bank Fulfills Promise of Forex Intervention, Franc Collapses

Last week, the Forex Blog concluded a post on the Swiss Franc by suggesting that the Swiss National Bank (SNB) could artificially depress the value of its currency, which had “not just posted strong gains against the euro since late August but has gained 8% on a trade weighted basis.”

Korean Won Continues to Plummet as a Result of Acute Dollar Shortage

The Korean Won is among the biggest losers of the credit crisis, excluding Iceland of course. The currency has fallen 40% against the Dollar over the last year, even adjusting for a 10% rise in the last week. South Korean Finance Minister Yoon Jeung-hyun blames currency speculators, pledging that “The government will not sit idle when the foreign exchange rate is excessively tilted toward one direction or when there are

Central Banks Maintain Holdings of US Treasury Securities, but For How Long?

Yesterday, Chinese Premier Wen Jiabao aired his country’s growing concerns about continuing to lend money to the US. Within the context of the US economic stimulus plan and other related US spending initiatives, Mr. Wen is understandably anxious about China’s vast holdings of US Treasury securities:

Swiss Franc Rises on a Trade-weighted Basis, but Down against the Dollar

Most of the “safe haven” talk in forex circles has focused on Japan and the US. Switzerland, meanwhile, has also attracted is fair share of risk-averse investors, who are piling into Franc-denominated assets, despite the deteriorating Swiss economic situation. In fact, February witnessed an inflow of $4 Billion, most of which was targeted towards gold and money-market funds. The Swiss Franc, as a result, has appreciated by 9% (on a trade-weighted basis), since the summer.

UK, EU Central Banks Follow the Federal Reserve

Yesterday, both the European Central Bank (ECB) and the Bank of the UK cut their benchmark interest rates to record lows. This is especially incredible in the case of the UK, whose Central Bank over 300 years old! You can see from the following chart that both Central Banks have more than made up for their respectively slow starts in easing monetary policy by effecting several dramatic rate cuts, following the example of the Federal Reserve. The baseline UK rate now stands at .5%, only slightly higher than the Federal Funds rate, and slightly lower than the 1.5% ECB rate.