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The dollar has been weakening precipitously, with the dollar index declining nearly 10% over the past few months. I’m curious to hear tomorrow how the Fed inte

by danhak 6y ago

The dollar has been weakening precipitously, with the dollar index declining nearly 10% over the past few months. I’m curious to hear tomorrow how the Fed intends to address this.

TMWNN 6y ago
>The dollar has been weakening precipitously, with the dollar index declining nearly 10% over the past few months. ... which is still up 6% from its 5-year low (January 2018), up 24% from its 10-year low (April 2014), and down 6% yoy. >I’m curious to hear tomorrow how the Fed intends to address this. What is there for the Fed to address? A weaker dollar, in and of itself, benefits US exports and reduces the trade deficit.
- danhak 6y ago
  The difference between this moment and 2018 or 2014 is that we are in the middle of a bona fide crisis, and we went into it with rates already near rock bottom. That leaves few options if dollar continues to weaken and inflation becomes concerning.
  - AnimalMuppet 6y ago
    If inflation becomes concerning, rates near rock bottom is not a problem. You deal with inflation by raising rates, not by lowering them.
    - danhak 6y ago
      Yes, of course, I understand that. But in the middle of a recession that becomes Sophie's choice: do you raise rates to curb inflation while killing the chance of a recovery?
      - AnimalMuppet 6y ago
        Ah, I see your point. Still, this isn't the stagflation of the 1970s. While there may be underlying problems, the main issue is that Covid shut down parts of the economy, which also meant shutting down parts of employment. The trick really isn't to avoid inflation. The trick is to make it back to approximately normal without killing too many businesses and bankrupting too many families (while also not killing too many people). If inflation happens as a result, but we get back to a healthy economy, then we can worry about inflation. For the next one or two years, I don't think that inflation is the issue to focus on.
        danhak 6y ago
        That is the big question and I think the answer remains to be seen. Is Covid an acute crisis where we quickly bounce back to "normal," or is it the catalyst for a broader deleveraging that may have been due for several years and with many of the layoffs being "sticky"
mpalczewski 6y ago
That's not much perspective. It's down 10% but part of the reason why is that it was up quite a bit earlier this year. There was a dollar shortage and the fed opened swap lines to alleviate. It's not that weak, and would need quite a bit of weakening to get to where it was in 2018, further weakening to get to where it was in 2013, not to mention 2011.
- jeffbee 6y ago
  Versus what? USD has been in a steady decline vs. CHF over the past year. USD is in fact at a five-year low vs. CHF. It's also at a 2-year low versus the Euro.
  - mpalczewski 6y ago
    Was looking at DXY. The dollar currency index which looks at a basket of currencies, but weighs heavily towards the euro. Still hasn't dropped even to early 2018 levels against the Euro.

by danhak 6y ago

The dollar has been weakening precipitously, with the dollar index declining nearly 10% over the past few months. I’m curious to hear tomorrow how the Fed intends to address this.

TMWNN 6y ago

>The dollar has been weakening precipitously, with the dollar index declining nearly 10% over the past few months. ... which is still up 6% from its 5-year low (January 2018), up 24% from its 10-year low (April 2014), and down 6% yoy. >I’m curious to hear tomorrow how the Fed intends to address this. What is there for the Fed to address? A weaker dollar, in and of itself, benefits US exports and reduces the trade deficit.

danhak 6y ago
The difference between this moment and 2018 or 2014 is that we are in the middle of a bona fide crisis, and we went into it with rates already near rock bottom. That leaves few options if dollar continues to weaken and inflation becomes concerning.
- AnimalMuppet 6y ago
  If inflation becomes concerning, rates near rock bottom is not a problem. You deal with inflation by raising rates, not by lowering them.
  - danhak 6y ago
    Yes, of course, I understand that. But in the middle of a recession that becomes Sophie's choice: do you raise rates to curb inflation while killing the chance of a recovery?
    - AnimalMuppet 6y ago
      Ah, I see your point. Still, this isn't the stagflation of the 1970s. While there may be underlying problems, the main issue is that Covid shut down parts of the economy, which also meant shutting down parts of employment. The trick really isn't to avoid inflation. The trick is to make it back to approximately normal without killing too many businesses and bankrupting too many families (while also not killing too many people). If inflation happens as a result, but we get back to a healthy economy, then we can worry about inflation. For the next one or two years, I don't think that inflation is the issue to focus on.
      - danhak 6y ago
        That is the big question and I think the answer remains to be seen. Is Covid an acute crisis where we quickly bounce back to "normal," or is it the catalyst for a broader deleveraging that may have been due for several years and with many of the layoffs being "sticky"

mpalczewski 6y ago

That's not much perspective. It's down 10% but part of the reason why is that it was up quite a bit earlier this year. There was a dollar shortage and the fed opened swap lines to alleviate. It's not that weak, and would need quite a bit of weakening to get to where it was in 2018, further weakening to get to where it was in 2013, not to mention 2011.

jeffbee 6y ago
Versus what? USD has been in a steady decline vs. CHF over the past year. USD is in fact at a five-year low vs. CHF. It's also at a 2-year low versus the Euro.
- mpalczewski 6y ago
  Was looking at DXY. The dollar currency index which looks at a basket of currencies, but weighs heavily towards the euro. Still hasn't dropped even to early 2018 levels against the Euro.