The Federal reserves have announced the decision to buy $300 billion dollars. Post that, the dollar is getting hammered left right and center, across the world markets.  When the Fed buys bonds, that very act creates more money. That money gets pumped into the economy. More dollars have the opposite effect : it ends up weakening a country’s currency.

This creates a dilemma for the investors. In the short term, there is going to be pressure on the dollar. Should they bet on it weaking further and sell short ? On the other hand, if the Fed is right and the U.S. economy recovers quickly , the dollar would gain strength against other currencies and hence appreciate. So should they take up this chance and buy the U.S. dollar?