FX.co ★ Fed calms market turmoil with aggressive easing

The US Federal Reserve System has once again proved the status of the most powerful financial institution. The professional actions of the Fed’s officials helped not only stop the recent record market crash but also improve the general situation. In March, the market collapse almost destroyed the existing financial system, while the coronavirus pandemic only added new problems for the Federal Reserve. In an emergency move, the regulator announced the launch of a new quantitative easing program to pump up financial markets with enough dollar liquidity. The central bank began buying $75 billion worth of government bonds every day which has been the largest ever asset-buying program. This move has brought the markets back to life. When the markets had perked up, the regulator started gradually reducing the volume of financial injections to $60 billion, then to $50 billion, $30 billion, and $15 billion. Currently, the Fed spends on Treasuries only $10 billion per day. By the end of April, the Fed’s balance sheet increased to a record $6.80 trillion which is $2.664 trillion higher than a year earlier. In theory, such a maneuver should have sent the US dollar into a tailspin. However, it did not affect the greenback whatsoever. Nowadays, the American dollar is trading in the usual range and without any sharp increase against its major counterparts.