Fed should wait...

A strong-dollar is bad for US’ exports and employment in the country. i think Krugman is pointing in the same direction, more exports, more employment and more growth. Even the QE in US was initially designed to depreciate the dollar by increasing money-supply and give exports a push. Even the whole Europe is on the same track... QE and depreciation... Just the Fed’s signal for a hike can pull out money from emerging market and reinvested in US. More money-supply back to the US is likely to put downward pressure on the rates because money-supply to the economy will increase. The Fed has poured billions of dollars by QE which will return to the economy and that is going to lower interest-rates on government bonds and short-run rates will adjust to the relative money-supply. Whenever money-supply increases it lowers interest rates. In the models they assume no central-bank... when money-supply curves shifts to the right it will reduce interest rates... What will be the effect of money-supply on the dollar is still not clear because the money is already in circulation and will have only a marginal-effect on the dollar... Perhaps the Fed would not like see to US’ exports bogged down by a strong-dollar... The US has lot of potential in the import –substitution area because its trade deficit with China is high. Exchange rate depreciation has always been a centre-piece for countries struggling with recession. Fed should wait because rate hike can make the economy uncompetitive...