​US Dollar May Rise as Fed Ends Dovish Policy

WikiFX News (23 Nov.) - Recently, the US Treasury requested a cut in monetary policy. As a result, the decline of the dollar came to a standstill. In addition, the dollar may bode well for bulls as the Fed will release meeting minutes this week.

Treasury Secretary Steven Mnuchin said these facilities, which were established to provide liquidity, had successfully achieved their intended purpose and should expire as required. “While portions of the economy are still severely impacted and in need of additional fiscal support, financial conditions have responded and the use of these facilities has been limited,” Mnuchin said.

The announcement was not expected by Fed officials, who said fiscal policy support, not additional monetary-policy action, was what the US needed most as surging Covid-19 infection rates threatened to smother economic activity. The Fed also said its monetary policy might have reached its limits in fighting the Covid-19, implying the quantitative easing may be coming to an end and the dollar's decline will stop.

With this in mind, the upcoming release of minutes from this Thursdays FOMC meeting may inspire US dollar gains if policymakers again assert that there is little to be done for monetary policy besides the management of credit costs. It seems likely to sour risk appetite, reviving demand for haven assets.

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Chart: Trend of the DXY Index