24. maj 2010


Excerpt from: http://online.wsj.com/article/SB40001424052748704513104575256661429520000.html?mod=djemITPE_h

“Policy makers have been wary of using this tool for a decade and remain content to let markets set the value of the euro, which has fallen about 17% since early December, worrying U.S. exporters who face European competition and raising fear of inflation in Germany. Concerns about the prospects of intervention pushed up the euro to near $1.26, after the currency slipped below $1.23 earlier Thursday.

“I’m really concerned about the rapid [pace] of the fall of the exchange rate,” said Jean-Claude Juncker, the head of euro-zone finance ministers, on Thursday, though he said he didn’t think euro’s level required “immediate action.”…”


“In a currency intervention, central banks buy large amounts of a weak currency in exchange for a strong currency, in hopes of reversing the weak currency’s decline. But interventions often fail.

Neither the U.S. nor the euro zone has intervened in currency markets since 2000—and both have long been skeptical about the practice’s effectiveness. The U.S. joined Europe, Japan, Britain and Canada in buying $3 billion to $5 billion of euros in September 2000 during a bout of euro weakness shortly after its introduction. Two months later, the European Central Bank bought more euros, when the currency was trading at about 87 cents—slightly less than half the high of about $1.60 it reached in April 2008.

Though the U.S. and Europe have spent extraordinary sums to fight the global recession, and dramatically eased monetary policy, they have left currency markets alone, figuring that the ups and downs of their currencies should reflect fundamental economics.”


“Many economists believe the euro is trading at an appropriate level, given Europe’s troubled budget picture and diminished growth prospects. The €110 billion ($136 billion) Greek loan package, followed by a nearly $1 trillion loan commitment for other troubled European countries, underscored the region’s financial frailty and raised the possibility that the ECB could print money and debase the currency. European wrangling over how tightly to regulate financial markets has also pressured the euro.

Some European officials say they believe a gradual fall in the euro is an economic plus because it will make European exports cheaper.”


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