The dollar weakened significantly against major currencies on Friday following the Federal Reserve’s announcement of its second round of quantitative easing, known as QE2. The move, designed to stimulate the U.S. economy, had the immediate effect of devaluing the dollar.

Market Reaction

Currency markets reacted swiftly to the news. The euro, British pound, and Japanese yen all saw substantial gains against the dollar. Investors expressed concern about the potential inflationary impact of QE2 and its effect on the dollar’s long-term value.

Key Currency Movements:

• Euro: Rose to a multi-month high against the dollar.
• British Pound: Strengthened considerably, boosted by positive economic data from the UK.
• Japanese Yen: Experienced a surge as investors sought safe-haven assets.

Analysts predict continued volatility in the currency markets as the implications of QE2 are fully digested. The dollar’s future performance will likely depend on the effectiveness of the stimulus program and the overall health of the U.S. economy.