KING DOLLAR

Recently Federal Reserve members have come out in favor of tightening US monetary policy and scaling back the Fed’s $600B quantitative easing program. Today’s non-farm payrolls report could go a long way to convince additional Fedmembers that the time has come to begin the normalization of monetary policy. This would ultimately lead to dollar strength, but more vocal support will ultimately be needed.

There have been multiple instances of Federal Reserve members publicly declaring their support for the reigning in of US monetary policy which in turn boosts the dollar.

St. Louis Federal Reserve Bank President James Bullard has said the Fed should review its program of quantitative easing in light of recent positive economic data as the US economy, “Is looking pretty good.” Bullard, who does not have a vote on the Federal Reserve Open Market Committee said during the upcoming April meeting, the Fed may reexamine its decision to purchase $600B in US government bonds in order to lower US interest rates further and support the economic recovery.

Bullard continued his vocal support for tightening of monetary policy in regards to QE II, “The economy is stronger and inflation is higher than when we did the decision,” Bullard said. “So why aren’t you adjusting policy? If you are not adjusting, you don’t have a state-contingent policy. It would be an important signal to send.”

Philadelphia Federal Reserve Bank President Charles Plosser proposed a strategy of raising interest rates and reducing the Fed’s balance sheet on which it holds billions of dollars of US treasuries and other bonds. Plosser also does not have a vote on the Federal Reserve Open Market Committee

Minneapolis Fed President Narayana Kocherlakota helped to boost the dollar when he commented to the Wall Street Journal that the fed funds rate could rise by 75 bp by the end of 2011. Kocherlakota is considered an inflation hawk and is a voting member on the Federal Open Market Committee.

Further speeches by Charles Plosser and New York Fed President William Dudley may also have an impact on the dollar (NOT!). Dudley who does have a vote on the FOMC is considered an inflationary dove (LOL).

LETS SEE WHAT ALL THE TALK HAS DONE FOR THE DOLLAR, NOTHING

WE WON"T GET FOOLED AGAIN!!