Fed's Move: What It Means For Investors and Markets

Dollar

The dollar slid precipitously, sparked by more concerns over a flood of US borrowing around the world.

The move was most responsible for the higher trend in commodities, which benefit because they are sold in dollars.

In addition to the core issue of the Fed expanding its balance sheet even further, currency investors were spooked on a general feeling that policymakers were going to seek to bolster the economy even if it came at the dollar's expense.

"The dollar liquidation was broad-sided." Wilkinson wrote. "It appears that as much as the case for zero interest rates appealed to investors through an outward signal of proactivity from a central bank, quantitative easing has an unwanted stigma attached that sours the palatability of holding onto associated currencies. As investors realize this they are quick to dash for the exits."

The dollar index, a gauge of its performance against a basket of six major currencies, slipped 1.4 percent to 82.994 after a 3 percent slide on Wednesday—its biggest one-day drop in about of a century, according to Reuters data. It earlier slipped to 82.880, the lowest since early January.

"Investors were already selling the dollar before the Fed, but the announcement seemed to have given a green light for more euro buying (and dollar selling)," said Marc Chandler, global head of forex strategy at Brown Brothers Harriman in New York. "This correction in euro-dollar seem to be moving towards the $1.40 level. I wouldn't be surprised if we hit that marksoon."

Oil

Like the others in the commodities field oil also fed off the dollar's weakness, breaking out of a two-month trading range.

Crude prices eclipsed $50, sending a feeling through the trading pits that there was still more room to the upside as the dollar was likely to continue to slide.

"We have for the time being a return to risk appetite in the oil market and it's based on the Fed's announcement yesterday," said analyst Mike Wittner of Societe Generale. "That's having a positive impact on sentiment."

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The $50-mark has been the top of oil's trading range so far in 2009. A close above that level is needed to increase the prospect of a further rally, said analysts who use past price moves to predict future direction.

Treasurys

Bond prices rose sharply after the Fed announcement, though the after-effects were somewhat muted in Thursday trading as yields continued to tumble.

The 30-year bond saw little benefit as the Fed said it would focus most of its buying on two-year and 10-year notes.

Still, the benchmark yield promptly shed nearly 50 basis points Wednesday, providing plenty of upside effect for investors.

"We are still feeling the after-effects of that," said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco, adding "Treasurys still have a solid bid at these new, higher (price) levels."

--Reuters contributed to this report

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