“The Federal Reserve’s decision to unleash a third round of bond purchases from banks to stimulate the U.S. economy will likely weaken the dollar and do little else, said Ed Moya, chief currency strategist for Trading Advantage, a leading trading education firm.
The Fed recently announced plans to buy $40 billion in mortgage-backed securities held by banks every month until the economy and labor market improve, a monetary policy tool known as quantitative easing (QE).
The announcement marks the third time the Fed has rolled out QE measures to jolt the economy since the 2008 financial crisis, with the first round seeing the Fed snap up $1.7 trillion in mortgage securities and the second round seeing the Fed buy $600 billion in Treasury securities held by banks.
QE aims to stimulate the economy by injecting the financial system full of liquidity via bond purchases that push down interest rates to encourage investing, job demand and stock market gains.
Fed Chairman Ben Bernanke claimed in a recent speech that past rounds of QE helped contribute to the creation of 2 million jobs; however, such tools carry diminishing returns and this latest round will likely do little to put jobless Americans back to work, Moya said.
“We’re ultimately going to see that it’s not going to be as effective as the first two and, ultimately, it’s just going to devalue the dollar,” Moya told Newsmax.TV in an exclusive interview.
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