The strength of the U.S. dollar has long been a thorn in President Donald Trump&...
NEW YORK - The strength of the U.S. dollar has long been a thorn in President Donald Trump’s side. That has put the almost unthinkable scenario of currency intervention up for debate in global foreign exchange circles.
Most recent FX interventions by policymakers in developed economies have been to address currencies getting out of whack from historical exchange rates or to counter disorderly markets. The United States’ most recent intervention in currency markets was in 2011, when it joined other countries in a concerted intervention to weaken the yen after the Japanese currency appreciated sharply following a massive earthquake in Japan.
In addition to these funds, the Fed has traditionally matched Treasury intervention funds, thus essentially doubling the Treasury’s firepower. In principle, the Fed could also expand its balance sheet beyond that to buy foreign assets and other countries could agree to join the United States in the intervention.
Citi FX strategists also see the chances of intervention rising if the dollar strengthens about 10% further from here, with the risk of intervention becoming acute around EURUSD at $1.05.“This would go against the grain of years of G7 accords which maintain that markets should set exchange rates,” Rabobank’s Foley said.
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