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Moran Says Federal Reserve Asset Purchases Not Weakening Dollar

Warnings that the Federal Reserve’s renewed round of asset purchases would devalue the dollar are “misplaced,” according to Michael Moran, chief economist at Daiwa Capital Markets America Inc.

After the central bank announced Nov. 3 it would inject another $600 billion into the financial system though June to spur the recovery, some countries, including China, accused the Fed of trying to weaken the dollar. The currency then proved to be last month’s best investment, beating stocks, bonds and commodities.

“Those criticisms that they’re debasing the dollar are misplaced,” Moran said today in a radio interview on “Bloomberg Surveillance” with Tom Keene. “If you look at what has happened with currency movements, they’ve moved in favor of the dollar in recent weeks.”

The U.S. Dollar Index, which tracks the currency against those of six major U.S. trading partners including the euro, yen and pound, rose 5.09 percent in November. The dollar was down 0.9 percent against the euro at 9:34 a.m. in New York, at 1.3101.

Much of the strength comes from investors moving to the dollar as Europe’s financial situation worsens, Moran said. Even apart from that, the effects of the Fed’s decision on the dollar “have been quite limited,” he said. International capital flows, a gauge of how the purchase announcement moved the dollar, have not changed much, according to Moran.

To contact the reporters on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net; Tom Keene in New York at tkeene@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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