Tags: John-Taylor | Quantitative-Easing | Priced | Currencies

John Taylor: Fed Easing Will Keep Dollar Weak in November

Thursday, 28 Oct 2010 07:41 AM

The dollar will remain weak against the euro through November until the effect of the Federal Reserve’s bond-buying program deteriorates, according to John Taylor, founder of FX Concepts LLC, the world’s biggest foreign exchange hedge fund.

The greenback will bottom out between $1.40 and $1.43 before ending the year as strong as $1.30 against the 16-nation currency, Taylor said today in a Bloomberg Television interview with Erik Schatzker on the "Inside Track.’’

The Fed asked bond dealers how asset purchases will influence yields, according to a report by Bloomberg News, encouraging speculation that policy makers remain open to large acquisitions as they try to spur the economy under a policy know as quantitative easing.

The dollar declined 0.8 percent to $1.3879 per euro at 9:03 a.m. in New York. The Fed’s policy-making committee meets Nov. 2-3.

“The dollar will be weak, probably through the month of November, as we get a feel for the program,” Taylor said.

“The European situation is kind of the straw that breaks the camel’s back, the dollar situation is fluid; as the QE2 continues the dollar weakens. I expect to see the euro much weaker through the course of next year.”

Taylor, the chairman of FX Concepts in New York, retained his forecast the euro will fall to parity with the dollar in 2011. The U.S. currency has tumbled 8.7 percent against its European counterpart since Aug. 27 when Fed chairman Ben S. Bernanke pledged in a speech in Jackson Hole, Wyoming to safeguard the economic recovery through the purchase of Treasuries.

“As soon as the Jackson Hole issue, the QE2 issue came out, you sell the dollar,” Taylor said. “The best measure of when to stop selling the dollar is when the QE2 effort is matched by problems in Europe or problems in China.”

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The dollar will remain weak against the euro through November until the effect of the Federal Reserve s bond-buying program deteriorates, according to John Taylor, founder of FX Concepts LLC, the world s biggest foreign exchange hedge fund. The greenback will bottom out...
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2010-41-28
Thursday, 28 Oct 2010 07:41 AM
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