Reply #8: Interesting, but the dollar's value isn't really the Fed's chief concern,

[swag]

though it would be a concern in the event of a run, as Janet Yellen indicated in a June speech.

Anyway, foreign central banks were still buying plenty of US assets when short-term rates were much closer to zero. But Treasury securities at the short end of the curve weren't among their primary investments. At the long end of the curve, yields have steepened enough to retain some interest and avoid a sell-off (indeed, 10 year notes had a strong rally last week).

And the Fed doesn't hold the only interest rate lever or the only dollar value lever. It's not even the only central bank in the world.

The dollar has been rattling around between $1.20/euro and $1.30/euro for a couple years now. It may pop $1.30 soon and slide down toward $1.40. My sense is that any such slide would be gradual and buffered by a number of other factors, one of those being that other nations don't want to break the back of their best customer. If there were a run on the dollar, the Fed would act, probably initially with a 50 bps inter-meeting rate increase. But I don't think there's going to be a run on the dollar.

Anyway, I doubt that the dollar will be among the Fed's chief concerns tomorrow, when it pauses at 5.25%.