Danske Bank economists discuss the likelihood of a coordinated global intervention in the foreign exchange market with the intention of weakening the dollar. In his opinion, intervention in the foreign exchange market to weaken the dollar is currently not in line with US incentives to reduce inflation.
Low probability of coordinated intervention in the USD forex market
“We continue to believe that the probability of a broad global intervention in the FX market to weaken the USD is very low; close to zero percent by the end of 2022 and 10% by the end of 2023“.
“a necessary condition for a coordinated intervention in the G10 foreign exchange market is that the US supports such action. As long as US inflationary pressures are elevated, we do not expect such support.”
“We note that we should not consider intervention in the foreign exchange market as an appropriate tool right now. In our opinion, recent currency movements are fundamentally justifiedcurrency intervention would only increase market volatility and a weaker dollar only adds inflation pressures.”
Source: Fx Street

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