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Will the Fed Twist again? If the speculations are correct the answer is yes.
Already in the meeting minutes from the FOMCs meeting November 4-5, 2020, we could read that discussion about “lengthening the maturity of the Committee’s Treasury purchases” has been held. This operation often refers to ”Operation Twist”, due to the twist of the yield curve when the central bank buys long-term bonds and sells short-term bonds to bring down rates at the longer end.
Speculations about Operation Twist have intensified after the recent steepening of the yield curve. Fed has done the Twist two times earlier, 1961 and 2011, and other CBs like Bank of Canada (BoC) and Reserve Bank of India (RBI) have already taken that path last year.
If history repeats, we could see a stronger dollar in the medium term.