So far, 2012 has not been a good year for the US Dollar. Year to date,
it has weakened against 98 out of 120 currencies. Then today the Fed announced that it doesn't plan to raise rates until after 2014 which is further out than previously expected and will add additional downward pressure.
More from Reuters on the Fed statement:
Buying picked up after the Federal Reserve said it would keep interest rates near zero through at least 2014, which was longer than many investors anticipated. The actions were taken as a sign of the central bank's commitment to boost a sluggish economic recovery.
"What caught the market off guard was obviously the fact they are going to keep rates lower for longer," said John Canally, investment strategist at LPL Financial in Boston.
"This statement (on an inflation target) moves the ball slightly down the field" for possible more quantitative easing later, Canally said, referring to a type of monetary stimulus.
One of the currencies that has benefited most from the dollar weakening trend is the Mexican Peso. The Peso had a rough 2011 but 2012 is shaping up to be much better. So far, it has been the third best performing currency when measured relative to the dollar.
Goldman Sachs indicated today that it expects the Peso, along with the Canadian Dollar, to continue to strengthen and set a target of 12 for the USDMXN. This would mean the Peso would recover from all the weakening it suffered in 2011:
And of course with the Fed continuing to maintain a loose monetary policy, we have to check in with the price of our favorite commodity, WTI Crude. It's been in a holding pattern since November of last year but with continued tension in Iran combined with today's announcement, don't be surprised to see it hit a new high in 2012.
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