Mr B has mentioned again that intervention to save the dollar should be taken when necessary. I gather that he is planning to buy dollars along with his new pal Hank, but what is he intending to buy them with. Obviously with the yellow metal knocking on a grand an ounce that is one option for Mr B, but is there any gold left or is it all out on loan. I remember (vaguely) the big push a few years ago to turn the yen. Billions were thrown at the task at strategically quiet market times and yes the chart did reflect the effort before it went back to where it was. This question is too big for me and I now turn it over to ET jjf
Yes intervention does not work in the long run. The fx marketplace is too large (est daily dollar volume over 3T USD) for any sustained effect if only a few billion dollars are thrown at it. When fed banks try to intervene, you are talking about 5, 10, 25 billion used to influence the direction and help prop the value of the intended currency. It might work for those that don't have the extensive coverage of major currencies (like last weeks S Korean intervention of the WON), but in the long run, intervention will not have any sustained effect on the majors like USD, EUR, GBP, JPY, CHF. The only thing that can affect these currencies is the underlying financials of the country in question, i.e. interest rates, debt ratios, etc.
I agree cstfx, but even assuming he is silly enough to try, how would he go about it. After all he is talking about the reserve oil currency. Or is he just blowing smoke. jjf
The only way to support the dollar is to begin raising rates. Take back some of the emergency 75 bp SocGen inspired rate cut from earlier this year. 25 now and 25 in the fall would go a long way to push the dollar in the direction it is dying to go but won't until the fundamentals change.
Agreed, but that sets off another chain of events leading to a place that nobody wants to go. One alternative is to do nothing for the time being and watch the underlying current before acting. jjf
I trade fx regularly. I have been seeing some movements contrary to fundamental which appears to be intervention. It would not surprise me if Hank has his people trading in an effort to protect the 71 line on the dollar and also intervene when things get wacky.
I believe the Fed Reserve Bank of New York keeps track of FX interventions. It's released on a quarterly basis. It may only be for Federal Reserve Banks and not the Treasury Department.