Professional Documents
Culture Documents
Global Markets
The Dollar and non domestic investment flow to the US
Page 2
Page 3
Page 4
Page 5
Page 6
However.
Between the start of 2002 and today the average Fed Funds target rate has been just 2.8%. The average level of headline inflation through this period has been 3%. USD was not the only thing to be impacted by the accommodative policy settings through the past sixand-a-half years (USD index has dropped 37%) Over the same period price of oil moved from $20 a barrel to $139 a barrel (CRB more than doubles over same period).
The only period of stability in the oil market comes between August 2005 and June 2007 as the fed continues to tighten monetary policy (the average target rate through this period was 4.81%).
Price of oil doubles over past twelve months as Fed has cut policy aggressively. Currency markets increasingly reflect relative inflationary expectations (EUR has outperformed as yield curve has turned negative opposite story for the USD).
Page 7
Coincidence?
Page 8
Fed Funds futures move to price in a 50bp hike in target rate by end of October and the yield curve flattens.
President Bush states: We want the USD to strengthen. Treasury Secretary Paulson mentions the word intervention in an interview with CNBC.
Page 9
Page 10
Page 11