The Dollar's Gains May Be Gone for Goodhttp://www.fool.com/investing/international/2012/09/17/the-dollars-gains-may-be-gone-for-good.aspx Dan Caplinger
September 17, 2012
Everyone's celebrating about the bang-up job that Ben Bernanke and his colleagues at the Federal Reserve did in joining the global stimulus party. Stocks soared to new five-year highs last week, and with the Fed's news coming right on the heels of similarly bullish stances taken by the European Central Bank and the Chinese government earlier this month, it's looking increasingly likely that stocks will take a run at trying to set new all-time highs in the near future.
But beyond stocks, another part of the financial markets has seen a very different reaction from all the stimulus news. After an impressive run that took the U.S. dollar up to levels not seen in more than two years, the one-two-three punch of central bank and government intervention have knocked the greenback for a loop from which it may not recover for a long time.
Peeking at currencies
Greater optimism about economic prospects, though, put an end to the dollar's rise. And now, the provisions of the Fed's QE3 program include its intent to keep interest rates low at least through 2015. That essentially gives investors carte blanche to borrow U.S. dollars and invest them in higher-yielding currencies like Australia's or emerging currencies like Brazil's real. Moreover, with Europe appearing to be in better health, the euro has climbed above the $1.30 level and could easily see more gains.
3 cheers for stocks