US FOMC minutes released last week showed FED is concern over stronger dollar , however used only few words that fail to say, how serious FED officials might be in controlling it, or how a stronger dollar influencing US economy and FED's monetary policy decisions.
- US economy registered single largest trade deficit ($51 billion) in March 2015, not seen since 2012. Crude price is notably down, about 40-50% compared to 2012 and US now imports lesser barrels of crude than in 2012. These factors make this deficit digit of more concerning.
FED has one single tool (Forward Guidance) to tackle dollar' strength and FED communications suggest that FOMC participants are not using the tool to the fullest to tackle the issue.
- With interest rate at near zero level and $4.5 trillion balance sheet, there isn't much FED can do about dollar's strength. Moreover policy divergence at other central banks (namely ECB and BOJ) would keep dollar at uncomfortable level.
Dollar index is currently trading at 96.30, up 0.18% today. Index has recently broken its down trend line and looks poised to move further up.


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