The slump in the dollar is encouraging speculation that the ECB and the Bank of Japan will soon be ready to intervene in the markets to cap the strength of their own currencies. However, while the case for Japanese intervention is the stronger of the two, we do not expect either bank to act in the near future. Instead, the central banks with most to worry about are those whose currencies are pegged to the dollar and therefore excessively weak. This group includes many Gulf countries - where one-off revaluations against the dollar are looking increasingly attractive - and China - where the authorities are likely to allow the pace of the renminbi’s appreciation against the dollar to pick up further.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services