We believe that the mixed messages emanating from the Fed may be driven by the conflicting needs of the Fed and other central banks across the global economy.  The Fed needs to begin a process of normalizing interest rates in the US, but it would prefer to do so without spurring another dramatic rally in the dollar.  As the recent devaluation by China attests, a sharply higher dollar places strain on many emerging markets.  Because China’s currency is pegged to the US dollar, a rising dollar puts Chinese exports under competitive pricing pressure.  Meanwhile, indebted Latin American economies face higher debt burdens as their dollar-denominated obligations would rise in value along with the currency.  By delaying a US interest rate increase and putting out a fairly dovish statement, the Fed may be creating a window in which overseas central banks can provide additional monetary stimulus without necessarily triggering a destabilizing rally in the dollar.  

David Fuller's view

Here is The Strategic View.

Janet Yellen’s comments today indicate that she and most other Fed governors would like to raise rates by a quarter of a percent before yearend.  Previously, they had wanted to raise rates this month but were deterred by market chaos, concerns over a firm Dollar Index, and minimal inflation. 

If stock markets are steadier in December I think the Fed will introduce the first of its gradual rate hikes.  Anticipation of this would very likely increase upward pressure on the US Dollar.  The Fed could intervene, of course, as I maintain it did commencing in April following DXY’s push above 100.  However, there is every reason to believe that we have only seen the first upward leg in a long-term recovery for the Dollar.