Table Set for U.S. Dollar Intervention by World Banks

The U.S. dollar has fallen more than 15% in the past 12 months against the loonie and sank to another record low against the euro on Monday. The greenback’s freefall, which continued after the U.S. Federal Reserve’s emergency interest rate cut over the weekend, has kept talk of a potential intervention in favor of the U.S. dollar in the forefront.

While it is just talk for now, Dennis Gartman says the prospect of such a move – likely a coordinated effort by the U.S. Treasury, the Fed, the Bank of Japan, the European Central Bank, the Bank of England and the Bank of Canada – should not be dismissed.

The author of The Gartman Letter referred to comments made by ECB executive board member Bini Smaghi in September, when he detailed how such an intervention could play out:

Step One: Monitoring and assessing exchange rate markets and developments, with a focus on underlying fundamentals.

Step Two: Discussing these developments with other major players to assess currency developments and policies.

Step Three: Making public statements on the situation.

Step Four: Intervening in the foreign exchange markets.

Since verbal interventions have already begun, we are between steps three and four, with actual interventions due next, Mr. Gartman said. Mr. Smaghi has set the table for central banks and their governments around the world, he added.

Given the Fed’s willingness to take unprecedented action recently, if the tide shifts further against the greenback, investors should be prepared for almost anything, Mr. Gartman said.

Comments

[sedek]

I would suggest that banks have been intervening for some time now through rate cuts and devaluing their currencies by printing money like paper is free, which is why most majors have also fallen to gold and commodities.

If you suggest central banks do something more public, like peg currencies or buy massive more amounts of devaluing Dollars, I disagree. They already have enough of these deteriorating assets and the FOMC and US government give no reason to believe that fiscal responsibility will be restored any time soon.

[AmesTiedeman]

This will not happen. The U.S, wants a weak dollar regardless of what the idiots at Treasury are telling people.

[EUARTE]

It said over and over that the United States wants a weak dollar. Well let me tell you that Weimar also wanted a weak Mark. They got it and a whole lot more.

[01GTvert]

Should I be suprised more logic and sound economic thought is contained in the comments and not the article? I'd say it's becoming a trend.