Greenback considered risky due to US monetary policy

07-22-2009 15:34

Steven Englander, chief foreign exchange strategist for Barclays Capital, believes that overseas investors will consider the Greenback as a risky investment due to “significant skepticism” regarding the monetary policy of the United States, on which the Greenback will fall. “On the long-term the US Dollar probably will decrease even more,” Englander commented. “Despite the Department of the Treasury and the Federal Reserve attempting to provide the market certainty, there remain many unanswered questions regarding the structure of fiscal policy and monetary policy.” The central bank tries to continue its “extremely accommodative” monetary policy during a longer period of time as long as the economy proves “fragile indications of stabilization”, told Ben Shalom Bernanke, chairman of the Board of Governors of the United States Federal Reserve, the Congress. Policy will be sharpened in case of a structural recovery and when the job market progresses and pressures prevent inflation to rise, the Federal Reserve reported. “He created a rather distinctive debate regarding the possible consequences of pulling out, but the market requires other answers,” Englander commented. “In anticipation of a concrete plan to retrieve the quantitative easing, overseas investors will claim a risk premium, either on the US interest rates or on a falling Dollar in order to level out the projected yields between overseas investments and US investments.”