The coordinated effort by global central banks to step up liquidity support for financial markets has prompted some in the markets to speculate that coordinated currency intervention to support the dollar could be next reports the Financial Times.

 

The short answer appears to be that while the prospect of currency intervention is probably less remote than it was a couple of months ago, it remains highly unlikely.

 

“The coordinated efforts were to normalize conditions in the money markets,” says Hans Redeker, a currency strategist at BNP Paribas. “This does not mean foreign exchange intervention is imminent.”

 

Analysts say both the practical and principled obstacles to intervention remain strong, and calls for international action have weakened with the recent stabilization of the dollar against the euro and other freely floating currencies.

 

The US is meanwhile reaping the benefits of a lower dollar in the form of rapid export growth, which policymakers see as a vital buttress for the weak US economy.

 

A case can still be made for currency intervention. Some former Clinton administration officials in the US believe that coordinated intervention – or the credible threat of it – could reduce the likelihood of a disorderly dollar depreciation.

 

That in turn could give the Federal Reserve, which is concerned about the possibility of such a chaotic decline, greater latitude to cut interest rates and keep the US out of recession, these former officials argue.

 

Read it here: Currency Intervention still Remote