Jan 2, 2013
The relationship between the Euro (AMEX:$FXE), the U.S. Dollar (AMEX:$UUP) and the Singapore dollar has been a fascinating one all year. As I've stated in previous articles I am of the opinion that watching just the $EURUSD cross is not enough to understand what is happening behind the scenes of the central bank press conferences and policy statements. QE 3 was announced by the Fed in mid-September right after the ECB announced unlimited if conditional QE to deal with the problems in places like Spain. And yet, nothing changed in the monetary statistics of the Federal Reserve while the conditionality part of the ECB's new policy dominated the proceedings and no new bond buying was actually done.
There was a whole lot of sound and fury and not a lot of action.
Sure there was QE from other central banks, notably Japan — who are now committing hari kiri with the Yen (AMEX:$FXY) after relations between them and China deteriorated this past fall undoing their participation in the growing currency bloc that is forming in the ASEAN + Pacific Rim region. And there is no doubt that both the Fed and the ECB are involved with off-balance sheet swaps and other deals to provide liquidity in these markets, but all of that was ostensibly sterilized. In effect, these measures have been the deflationary-bust equivalent of tight monetary policy.
Well, the Fed has finally come out and said it's time to let loose the monetary dogs of war.
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