Forex trading online: Fed´s bond-buying program has future depending on next Fed Chief

The value of the dollar is heavily affected by the moves the U.S. Federal Reserve makes; this is why the importance of whom the next U.S. Fed. Chief will be is so important. The current program of the U.S. Fed, that is of interest for Forex trading online in the U.S. dollar, is the bond-buying program.

Gertrude Chavez-Dreyfuss of Reuters reported on September 16th of 2013 that “the dollar has been under pressure on recent disappointing economic data and as markets braced for an expected reduction by the Fed this week of its $85 billion monthly bond-buying stimulus by a modest $10 billion.” 

This has had an immediate effect on Forex trading online between the U.S. dollar and other currencies – including emerging market currencies. Chief economic strategist at Miller Tabak & Co. in New York, Andrew Wilkinson, said most emerging market currencies have at least halved their summer losses; which was a large change that was likely taken advantage of by many investors in Forex trading online.

However, Forex trading online investors may take advantage of a readjustment of the dollar´s value in relation to emerging market currencies. As Stephen Jen, co-founder of London-based investment firm SLJ Macro Partners mentions, “any rally in emerging market currencies and sell-off in the dollar will likely be short in duration and modest in magnitude [since] the medium-term trend in the dollar and the Treasury yield should broadly reflect the trajectory of the U.S. economy, which is up in my view.” Dirk Willer, managing director of emerging market strategy at Citi in New York, statement went along the same lines, saying that “the consensus for Wednesday has now swung to expect a very dovish tapering: $10 billion, combined with very dovish language and forward guidance, which is creating some short-term risks.”

This reaction in the dollar value in Forex trading online was mainly due to Summers stepping aside as a potential replacement of Ben Bernanke for the chair position of the Fed; which leaves the current vice chair of the Fed as the most likely candidate.