The DXY and the Q.E. Policies in the US: Lessons for 2021
QE1: From Dec 2008-June 2010. DXY decreased by 8%
Dec 2008 – Dec 2009 (when Bernanke fiirst announces that QE1 would end in June 2010): DXY decreased by 14%
Jan 2010 – June 2010: DXY increased by 16%
QE2: From Nov 2010 – June 2011. DXY (the USD) decreased (or depreciated) by 8%
QE3: Sept 2012 – Dec 2013.DXY decreased by 1.77%
Tapering: Jan 2014 – Oct 2014. DXY increased by 7.9%
Nov 2014 – March 2015 (first FOMC hike): increased by 14%
Conclusion: The QE process that took place in the US from 2008 through 2013 led to a dollar depreciation of around 10%. The depreciation got smaller with time because people quickly learned that the end of the QE was not end of the monetary expansion process. As we see, the first QE decreased the dollar by 14%, by Nov 2009. In Dec 2009, Bernanke announced Q1 would come to an end the dollar by June 2010. It was then that the dollar appreciated by 16%. Then, during the second QE the dollar depreciated by 8%. When it ended it was announced the so-called ‘operation twist’ and when this ends we had the third and last QE. The last QE, QE3 led to a smaller dollar depreciation of 1.77%. The tapering phase led to a dollar appreciation of almost 8% and from the end of the tapering until the first FOMC hike the dollar increased by 14%.
If past lessons are useful for our analysis we should say that since March 2020, the dollar has depreciated 9.6%. In recent weeks we are observing a dollar hike. In fact the USD reached the 2021 highest level. This might mark the beginning the increasing expectations that QE will end and tapering will start before the 2021 year ends. In turn, we are in a phase where the USD series might face a ‘strutural break’ and if the past repeat itself in the present we might observe the dollar to reach numbers that are higher than the previous level of 102. In other words, the key message of the 2008 financial crisis is that QE improved the overall US economy at the expense of a strong dollar. From Dec 2008 through March 2015, the dollar increased by 9%. If history repeats itself when we have the first FOMC in 2022, the dollar might reach 112.
Dec 2008 – Dec 2009 (when Bernanke fiirst announces that QE1 would end in June 2010): DXY decreased by 14%
Jan 2010 – June 2010: DXY increased by 16%
QE2: From Nov 2010 – June 2011. DXY (the USD) decreased (or depreciated) by 8%
QE3: Sept 2012 – Dec 2013.DXY decreased by 1.77%
Tapering: Jan 2014 – Oct 2014. DXY increased by 7.9%
Nov 2014 – March 2015 (first FOMC hike): increased by 14%
Conclusion: The QE process that took place in the US from 2008 through 2013 led to a dollar depreciation of around 10%. The depreciation got smaller with time because people quickly learned that the end of the QE was not end of the monetary expansion process. As we see, the first QE decreased the dollar by 14%, by Nov 2009. In Dec 2009, Bernanke announced Q1 would come to an end the dollar by June 2010. It was then that the dollar appreciated by 16%. Then, during the second QE the dollar depreciated by 8%. When it ended it was announced the so-called ‘operation twist’ and when this ends we had the third and last QE. The last QE, QE3 led to a smaller dollar depreciation of 1.77%. The tapering phase led to a dollar appreciation of almost 8% and from the end of the tapering until the first FOMC hike the dollar increased by 14%.
If past lessons are useful for our analysis we should say that since March 2020, the dollar has depreciated 9.6%. In recent weeks we are observing a dollar hike. In fact the USD reached the 2021 highest level. This might mark the beginning the increasing expectations that QE will end and tapering will start before the 2021 year ends. In turn, we are in a phase where the USD series might face a ‘strutural break’ and if the past repeat itself in the present we might observe the dollar to reach numbers that are higher than the previous level of 102. In other words, the key message of the 2008 financial crisis is that QE improved the overall US economy at the expense of a strong dollar. From Dec 2008 through March 2015, the dollar increased by 9%. If history repeats itself when we have the first FOMC in 2022, the dollar might reach 112.
