LTRO 2 mirror effect: Will history repeat itself?

Mecklai graph of the day - LTRO 2 mirror effect

The European Central Bank has conducted two Long Term Refinancing Operations (LTRO) since Dec 2011, the first LTRO was conducted on Dec 21st 2011 and the second LTRO on Feb 29th 2012. The effect of the LTRO on dollar has been significant. As seen from the above chart, dollar strength has been seen in the last week of Dec 2011, whereas post LTRO after two weeks dollar has swung the other way (reversal).

ECB commenced the second LTRO wherein it gave 529.5 Billion Euros to 800 banks on Feb 29th 2012. The reaction after the first LTRO as seen from the graph had shown dollar strength wherein Euro slid to 1.3046 and Rupee slid to 53.31. Since then, we have seen after 10 trading sessions that demand for equity and commodity has risen i.e. shift from safer assets to riskier assets. The end of the coming week will decide whether history will repeat itself or not.

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