Has anyone looked behind the facts behind the common perception that the FED, by lowering rates is killing the dollar.
If this were true, would the converse be true. i.e.. When the FED raises rates does that cause a stronger dollar ?
The answer is NO.
FACT:
In 2002 the Fed Funds Rate = 1.75%
In 2002 the Dollar Index = ~ 120
FACT:
In 2007 the Fed Funds Rate = 5.25% (prior to recent cut)
In 2007 the Dollar Index = ~ 82 (prior to recent cut)
So, the FED raised rates, in fact they TRIPLED the Fed funds rate, but the dollar still declined by more than 30% over this period.
It appears to me that the value of the Dollar is not really closely related to the Fed funds rate.
So, why all the buzz in the media about the FED killing the dollar ? It’s been declining over the past 5 years. Must be other factors at play here, don’t you think.
