The Federal Reserve, Bank of England, European Central Bank, Swiss National Bank, and the Bank of Canada have announced a joint plan to increase liquidity in the global markets by auctioning loans to major financial institutions. Under the auction system, banks will be able to discount borrow at lower rates and anonymously. The impact on the US dollar is unclear for now as both Fed and ECB predictions are rate cuts, therefore, we could actually see an appreciation in the US Dollar, especially against the Euro.
The rate cut and liquidity pact will be an attractive situation for higher-yielding currencies and carry trades. With Japan having the lowest interest rates in the developed world, investors borrowed Yen and bought higher-yielders sending the Yen into a free-fall. The dollar traded up to 112.45 against the Yen, a 1.4% increase for the day.