Portfolio manager Axel Merk tells The Wall Street Journal that the Fed provides a disincentive to foreign governments to support the dollar.

"[..] But others see the long-term trends as inescapable, among them the expectation that the Federal Reserve will expand its purchases of long-term agency and Treasury debt, which hurts the value of those securities. 'By buying those securities you keep prices artificially high and the yields artificially low,' says Axel Merk, president of Merk Investments. 'Foreign governments are going to have a disincentive to buy U.S. debt. People are positioning themselves now for next year, and next year were going to have a huge mess.'

[..] Mr. Merk says the strengthening dollar of late had a panic element to it, and this action marks the re-establishment of the longer-term trend. When the dollar was rallying, those seeking the safety of U.S. assets were buying short-term bills while ignoring almost all else, which, he says, 'is not the hallmark of a sustainable rally.' "