Why did the US$ drop in value last June 29?

Question

After the interest rate adjustment last June 29, what caused its value to go down (as compared with the GBP, Euro, CHF and JPY)? I had the idea it would go up against the European currencies.

Answer 1

that is odd.
usually money is bought as rates rise due to the fact that traders want to get in to profit on a strong currency. i would say that it was probably discounted already..this happens all the time..traders knew what the outcome was and got in the action early, when the news came out, they dumped.

the us$ isn't as strong as it used to be..we're being propped up by the chinese govt and japanese govts..they are the ones buying our t-bills..they hold so much that if they stopped buying or rolling them over, we'd be up creek.

the gbp has always been strong..the euro is stronger than the us$ and has been that way for the past few yrs.

Answer 2

The reasons for daily fluctuations in the value of the dollar, or any other currency, usually concern trading activity on the day in question. There are lots of speculators in the currency markets and they determine short-term trends in price by their marginal trading activities, which are based upon their short-term expectations.

But in the longer-term, the US dollar is expected to gradually decline in value due to "the twin deficits"; i.e., the budget deficit and the trade deficit. When a country owes more debt than it can repay it may seek to correct this imbalance by "monetizing its debt", which means devaluing its currency so that it is repaying the debt with cheaper dollars than it borrowed. It accomplishes this seemingly miraculous feat simply by printing more money than is needed for mere economic activity. The more surplus money there is in circulation, the less each dollar is worth.

In addition, when other countries sense that this sort of currency manipulation is a growing possibility, they begin selling it, which further reduces its value and adds to the rate at which the currency declines in value. They will usually replace the declining currency with gold or with currencies they believe will increase in value, or a combination of both. At some point in such declines, when a general concensus exists that the currency is headed toward worthlessness, there will be a "run" on the currency which will cause a "crash", as many traders and investors and countries all try to sell the currency at the same time. This is usually a good time to have a lot of gold in your portfolio.

Answer 3

you do realize that the american dollar is based on a gold reserve right? well, in the begining, each dollar had an equal amount of gold in reserve... that is what made the dollar valuable. we no longer had to take a chunk of gold to the store and trade it for goods equal to it's value. BUT, over time the united states has printed more paper money than what it can back the cash value of in gold... so, our money is not worth as much. i can in NO WAY tell you what the interest rate would have to do with the value of the american dollar... BUT, it is common knowledge that european countries money is worth more than ours... and some countries, like austrailla, has money that is worth less than the american dollar.

Answer 4

Isn't that the market move base on rumor and when the real announcement made is sell off?

And, the Fed speech sound as if rate hike might close to and end.

Answer 5

USD declined because the Fed Chairman hinted that they might stop raising interest rates.

Answer 6

I believe it was because the FED finally raised the rate to %5.25 and there was no more anticipation left.

Answer 7

It's called inflation.