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|User Info||Why this time dollar goes up while Fed signal further cut?; entered at 2007-12-02 12:18:01|
Registered: 2007-08-22 Paradise
The dollar's reaction to rate cuts (which have not yet occured) is downward. Like gravity this relationship does not change. BUT as Matt noted it is not the only relationship the dollar has. It is in fact most based on a relationship to other currencies. Those currencies react to their own rates and the financial stability of their country. |
Many entities are short the dollar, so like any other commodity it will also react to market manipulation, or even without manipulation but sentiment, react to short covering.
If rates fall in other countries the dollar should rise in relation to that country's currency. Likewise if banks fail in foreign countries resulting in a financial collapse the dollar will rise in relation to that country's currency.
BUT... don't mistake the relationship of the dollar with rate cuts as being something that would cause a rise in the dollar. Many experts in the past few months have stated that as a fact rate cuts will increase the dollar. Few of those experts believe what they are saying... they are intentionally lying to try to influence (or manipulate) the public into believing the inverse of the dollar's relationship with interest rates.