Intervention to Weaken the USD?
Yesterday Lananh Nguyen wrote an article in Bloomberg suggesting that Trump may intervene to push lower the USD. (FX Traders Are on Alert as U.S. Dollar Intervention Risk Climbs). The last time we saw intervention was in 2000. I have also attached a pdf to show the history of intervention pre-2000. (For all the currencies see Timeline: History of central bank intervention)
Economists will tell you that interventions don’t work. They cause a knee-jerk reaction and then the currency returns to normal. Unfortunately, that ‘knee-jerk’ can wipe out your trading account – especially with the current common practice of trading up to your margins and not placing protective stops.
It’s been eighteen years since the last USD intervention and prior to that, in 1995. So we have a whole bunch of traders who have never seen the volatility a USD intervention can bring.
How likely is a Trump led USD weakening? I’d suggest low. However, we are speaking about Trump who is likely to what is least expected. So, a hint to the wise – protect your open positions!
2018-08-15 History of central bank intervention
Source: http://www.tradingsuccess.com/blog/intervention-to-weaken-the-usd-6213.html
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