FED’S TIGHTENING POLICY Is the US Economic Weakness Only Transitory?
Te Federal Reserve Bank is on its tightening monetary policy path and one would say that winding down the tents of the quantitative easing program and increasing the interest rate from their ultra-low level would encourage investors to send the dollar higher and higher. However, if you look at the dollar index on Chart 1, you can see that it is down nearly -7.22 percent from its Dec 2016 highs. It is very possible that the dollar index could fall all the way to 94.08 which would be approximately 10 percent correction.
Chart 1. Dollar Index
Source: Bloomberg FX TRADER MAGAZINE July - September 2017 17