Peso devaluing vs. Dollar - Central Bank to Intravene?

[jimmythegreek]

The US Federal Reserve is set to reduce (taper) their asset purchase plan from the current 85 billion per month. Best estimates are for a 10-15 billion monthly reduction.

This will signal that the Fed believes the US economy is getting stronger and will have the effect of strengthening the dollar against other world currencies, especially those that are vulnerable because of their own internal domestic economic problems.

Likely most emerging market currencies will be further affected...particularly the Brazilian Real. More importantly, at least on this board, the peso will come under further pressure in the coming weeks....unless President Medina via the Central Bank makes more dollar liquidity available.


Respectfully,
Playacaribe2

That's the media's interpretation of the Federal Reserve curtailing bond purchases, but the reality is that the Federal Reserve was tapered by the credit markets. Since May, interest rates have risen dramatically forcing them to the table to temper inflationary expectations before things accelerate further sending interest rates even higher.

 

[jimmythegreek]

What would happen if people realized the economy benefited from a government shutdown? Believe me-they won't let it happen because too many would then see the light outside Plato's Cave.

 

[delite]

I remembered the most recent shutdown was averted at the last hour, however, it had affected in a negative way our credit rating. I do hope more constructive minds would prevail to avoid another unknown.

 

[playacaribe2]

That's the media's interpretation of the Federal Reserve curtailing bond purchases, but the reality is that the Federal Reserve was tapered by the credit markets. Since May, interest rates have risen dramatically forcing them to the table to temper inflationary expectations before things accelerate further sending interest rates even higher.

I do not see it that way. The Federal reserve is not tapered by the credit markets, but rather the credit markets react to what the Fed is doing or says they are going to do.

Months ago the Fed signaled taper.....and the credit markets reacted by starting to raise rates in anticipation of that event.

Interest rates rising is a healthy sign for the economy. It means those artificaially and historically low rates can now start to be normalized. While I realize that everyone wants 3.5% 30 year fixed mortgage rates forever....those rates indicated an ecomomy still in turmoil.

Rising rates signal a strengthening ecoonomy.....and those rates not seen since WWII are now behind us. However, even today's rates at 4.75% for 30 year fixed mortgage loans are lower than the mortgage rate in 1967.

Fed has just announced no taper, but also acknowledged the downside risk to the economy has diminished.

S&P has reacted to the upside and rates are trending down...so stocks up and bonds down..for now.


Respectfully,
Playacaribe2

 

[delite]

Bulletin: Feds just announced that bond by back would remain intact. Wall Street is reacting favorably.

 

[playacaribe2]

In spite of President Medina's injection of dollars into the economy to ostensibly bring the dollar rate down, here is the real answer as to where the government projects the peso for 2014. Bear in mind, that is what they expect it to average for the year.

http://www.dominicantoday.com/dr/ec...2014-budget-of-US148M-is-US10B-more-than-2013

Additionally, a 4.5% growth rate for 2014 is also a bit ambitious, but that allows the government to project more revenues....and thus justify bigger budgets...which means more spending. At the end of the year (2014), I expect the DR economic growth rate to be in the 3.5% range....which based on this budget will push the peso beyond the governments average of 44.4:1.




Respectfully,
Playacaribe2