Global forex market
THE US Federal Reserve has practically issued itself a blank cheque last Wednesday. It is an open ended cheque book that will purchase longer-term Treasury securities at a pace of US$45bil per month after Operation Twist expires at the end of this month. This is in addition to the purchases of mortgage-backed securities totaling US$40bil per month. The surprise result though was the decision to pursue further policy accommodation until numerical macro targets. With the promise to bring down unemployment rate to less than 6.5% and to keep inflation below 2.5%, the longevity of this programme is well anchored. It is not only here and it is here to stay essentially almost forever. We saw the same reaction after the induction of the quantitative easing 3 mortgage-backed securities purchases programme on Sept 13. The equities markets levelled off immediately after the last-gasp advance and the greenback triggered an abrupt reversal not a day later.
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