11 Jul 2013
Flash: USD should benefit from Fed taper – HSBC
FXstreet.com (Córdoba) - Changes in direction in Fed policy do not occur very often and, when they do, they usually signal an intent to make significant policy adjustments over many months, according to the HSBC analyst team.
"It is therefore unsurprising that the markets are heavily focused on signs that the Fed intends to begin withdrawing the extraordinary monetary support that has been in place for a protracted period", HSBC says.
Analysts note that historically, a move to tighten policy by the Fed is dollar negative if the policy change comes in response to a perceived inflation threat. "When a policy change comes in response to the strength of the economy, then the dollar tends to perform well", they add."This time round, any move by the Fed will be in response to the economy rather than to inflation, so moves to start withdrawing monetary support should see the dollar benefit".
"It is therefore unsurprising that the markets are heavily focused on signs that the Fed intends to begin withdrawing the extraordinary monetary support that has been in place for a protracted period", HSBC says.
Analysts note that historically, a move to tighten policy by the Fed is dollar negative if the policy change comes in response to a perceived inflation threat. "When a policy change comes in response to the strength of the economy, then the dollar tends to perform well", they add."This time round, any move by the Fed will be in response to the economy rather than to inflation, so moves to start withdrawing monetary support should see the dollar benefit".