Dollar Support Rhetoric Escalates at G-7

Posted on April 30, 2008 in ()

Dollar Support Rhetoric Escalates at G-7

One thing that most pundits agree on is that any intervention aimed at supporting the dollar would have to be a coordinated effort of the G-7 Central Banks and Government Ministries. In what amounts to monetary policy saber-rattling, G-7 officials emerged from the Washington summit solidly united behind a strong dollar policy. In reality, no one is stepping-up to actually extend an arm to catch the falling knife that is the US Dollar. It is one thing to talk about it; it is a completely different and rare event to actually pull off a coordinated intervention.

The battle of words comes at a time when dollar is seeing almost monthly historic lows and flirting with some very significant technical levels. Dollar supporters have managed to help the greenback recover some lost ground in the past few days, but there is simply not enough fundamental support in the economic cycle to support the dollar in the immediate future.

the EUR/USD trading range is narrowing and is very volatile. It is hard to believe that the G-7 would blow so much rhetoric without a back-up plan in the likely event that dollar resumes it's slide within a week. We are in uncharted territory. A close above 1.5870 is likely to start the next leg up significantly.

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