Forex Blog: Currency Trading News & Analysis.

November 15th 2007

Central Banks Prop up Dollar

Yesterday, we posted about the Central Bank of Australia, which intervened on behalf of its currency over the summer. In fact, several Central Banks have either intervened or are in the process of intervening, all with the goal of holding their currencies down (against the US Dollar) rather than lifting them up, as Australia had effected to do.  Columbia has already imposed strict rules governing the inflow of foreign capital, intended to discourage speculation, which is driving up the South American nation’s currency.  Indian regulators have since followed suit with similar rules.  South Korea’s Central Bank, meanwhile, is using slightly different tactics, undertaking a review of forex forward contracts, which it believes (probably erroneously) are interfering with its ability to hold down the Korean Won.  Bloomberg reports:

"Central banks are trying noninterest rate methods to stabilize growth and capital flows.  It’s something extraordinary. They haven’t used these venues for a long time. It’s sort of the last resort the central banks would like to tap."

Read More: Currency Controls Return as Central Banks Fight Gains

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Posted by Adam Kritzer | in Central Banks, Politics & Policy | No Comments »

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