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Remember the US Treasury’s strong USD policy? - Rabobank

FXStreet (Guatemala) - Analysts at Rabobank explained that a lot of water has flowed under the bridge since the US Treasury extolled its strong dollar policy in the mid-1990s.

Key Quotes:

“Although this policy has never been officially withdrawn by subsequent governments, it is clearly not consistent with a central bank that is following an aggressively accommodative course”.

“The USD index reached its all time lows in March 2008, undermined by the Fed’s aggressive rate cutting schedule of that period”.

“Since then it has been on a uptrend, although until recently its upward trajectory has been so weak that we have often described the USD index as bumping along the bottom after its sharp fall between 2002 and 2009”.

“Finally, in recent months the factors needed to support the dollar appear to have been re-grouping. A stronger USD will be welcomed by the ECB, BoJ and another other central banks that are grappling with the risk of deflation”.

“A stronger USD, however, is unlikely to be embraced with open arms by the Fed, corporate America or the US Treasury at this stage. Consequently there is a strong risk that the greenback’s recovery will be fraught with setbacks”.

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