Are we about to see a large scale intervention to tame the US dollar?
By Karin Strohecker and Sujata Rao
Thursday, March 19, 2020
LONDON — From Brazil to Norway, policymakers are leaping to defend currencies against the onslaught of the dollar, which scaled three-year peaks today, raising speculation that a joint move by the world’s biggest central banks may be in the offing.
Unlikely, most market-watchers say. But these are unusual times, and Norway’s central bank earlier in the day threatened to intervene to lift the crown, a step it hasn’t taken in more than 20 years.
The warning followed the crown’s 30% plunge versus the dollar in less than three weeks, though oil’s price collapse contributed.
But the dollar’s brutal ascent — up 6.5% this month against a basket of peers — has sent almost every other currency reeling. Amid the crisis caused by worries about how badly the coronavirus pandemic will hit the world economy, investors, and companies around the world have been scrambling to get their hands on the market’s most liquid currency. …
Could the answer lie in large-scale global intervention to tame the greenback?
Most top central banks, with the exception perhaps of Switzerland, are committed to letting markets determine exchange rates. Yet many welcomed Norway’s shift; Danske Bank economist Frank Jullum urged it to buy crowns “by the bucketful.”
One issue is that piecemeal central bank interventions are often doomed to fail as individual economies usually lack the firepower to influence currency markets for any length of time But shock-and-awe moves such as the coordinated Group of Seven moves to weaken the yen, seen after the 9/11 terror attacks or the 2011 Japan tsunami, have worked. …
… For the remainder of the report:
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