Saturday, April 12, 2008

G7 Statement. Why Care?

So the G7 decided to issue a statement against "sharp fluctuations in major currencies".

This will probably lead to a stronger dollar on Monday. However, unless those words are backed up by action in the form of lowering the negative interest rate differential or direct currency market interventions, there is no rational reason for caring about this.

I think it is basically out of the question that America would participate in such a intervention. Interventions by the Europeans and Japanese are by contrast possible-but at this point not likely. And while the ECB and Bank of Japan is likely to keep interest rates on hold, the Fed will likely cut them further. That means that the likely dollar bounce on Monday will be short-lived.


Post a Comment

<< Home