When the Federal Reserve announced yesterday that it would grow its balance sheet, that move also comes with implications for currency exchange traded funds (ETFs).
The Federal Reserve said it would expand its balance sheet to include another $750 billion of agency mortgage-backed securities, $100 billion in agency secrities and $300 billion in longer-term Treasury securities over the next six months.
After the announcement, foreign currencies rallied and ultimately brought the rally seen in the U.S. dollar to a grinding halt, leading to its biggest daily drop in more than two decades. Yesterday, the dollar fell 3.8% against the euro and 3.6% against the pound.
The long-term value of the dollar is now being questioned by some officials at Asia’s top think tanks, reports Reuters. Will the dollar remain a key global currency when all is said and done? Asia hopes that any decline in the dollar will be gradual to avoid more shocks to financial systems. For the time being, many market participants believe that the latest stimulus could lead to a prolonged decline in the dollar’s value.