What Operation Twist did to EUR/USD

A

acturater

I'm still trying to figure out why EUR/USD dropped so hard yesterday (9/21) after the Fed's announcement of operation twist.

I've heard the argument that more banks, central or otherwise, piled into the USD as a haven while also cutting back on holding more EUR reserves since August. While this makes sense as a longer trend, IMHO it does not explain the sharp move that happened immediately following the announcement of twist yesterday.

My guess would've been a stable pair due to the anticipation of the news, if not a higher lower USD from lower yields in longer term bonds.

Any insights?
 
I suspect part of the equation had to do with S&P Rating's downgrade of Italy's credit rating. Most players were looking at Moody's to do the job, so the S&P move was a surprise.
 
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