Currency traders must be getting whiplash. The dollar hit new lows against the euro Tuesday than sharply reversed direction on speculation that higher interest rates are ahead.
I’m not too excited by the dollar's action, says Joe Terranova on Fast Money. Personally, I’m not sure the dollar will get much stronger. I’ve tried to play the dollar from the longside and I don’t think it works.
Also, if we proceed with a massive liquidity for Fannie and Freddie that would be dollar bearish, adds Karen Finerman.
However, there's also a case to be made for dollar bulls; higher interest rates may be on the horizon. That belief was reinforced Tuesday by Charles Plosser, president of the Federal Reserve Bank of Philadelphia and a voting member of the Fed's Open Market Committee, who said the Fed will probably need to boost interest rates "sooner rather than later," even if employment and financial conditions haven't improved.
"Inflation is already too high and inconsistent with our goal of — and responsibility to ensure — price stability," Plosser said in a speech to a group assembled by the Philadelphia Business Journal.