It's hard to predict when the dollar will rise

What market participants feared did not happen, the Fed did not reduce the volume of monthly bond purchases. Moreover, the ultra-soft monetary policy will continue, and Fed Chairman Jerome Powell said that at any time it can become even softer, if necessary.

What does it mean for dollar rate? Will it continue to decline further, or should we focus on the resumption of growth? Anna Zaitseva, an analyst at Finam Group, answered Fortrader's question.

- The Fed's maintenance of asset purchases at $120 billion per month will contribute, all other things being equal, to a weakening of the U.S. dollar in the medium term. It is important to note that the Fed does not plan to curtail its bond-buying program until significant progress is felt in achieving employment and price stability goals. Given the fact that U.S. inflation is well below the target range, low interest rates and stimulative monetary policy in general will prevail for quite a long time. Under such conditions, many institutional investors (in particular, pension funds, insurance companies, etc.) will have to increase their investments in risky assets and diversify by currencies in order to achieve the required levels of return. This will contribute to further weakening of the U.S. dollar.

At the same time, we should not forget that other major central banks also adhere to the policy of monetary easing, and strong national currencies are not beneficial for them at all. For example, the Swiss National Bank has long been engaged in currency interventions aimed at preventing excessive appreciation of franc. As a result, the SNB was even added to the list of currency manipulators compiled by the U.S. Treasury. In addition, concerns about the strengthening of the euro and yen The ECB and the Bank of Japan, respectively, have repeatedly expressed this view. Therefore, the trend towards a weaker dollar may be partly offset by the efforts of other central banks to curb the strengthening of their currencies.

It is also worth bearing in mind that changes in the prices of instruments in the financial markets are cyclical in nature, and at the beginning of the correction in the stock markets, the U.S. dollar will be able to return some of its positions. However, it is rather problematic to predict the exact timing of the beginning of the correction.