“Hope you are enjoying Easter.

“Thanks to your timely advice I started hedging my dollar exposure (I am in the eurozone) at 1.055, thereby preserving all the gains I had made through my US shares on the dollar's rise. Thanks so much for reminding me of reality!

“Now I am watching developments with great interest. And your opinion that we are in for a period of ranging has stopped me removing the hedge, which has been quite tempting a few times.

“However I am a little puzzled by your opinion that the Fed is intervening secretly. Surely it would be much more effective for them to intervene openly? Because just by saying that they were going to do it, they would get all kinds of traders to short the dollar, thereby doing the Fed's work for them. They are so totally out in the open about what they intend to with with interest rates that I find it hard to believe they would do this secretly.  Especially since, if it works, they would like to take the credit for it.

“Do you know of occasions when they have intervened secretly? And later admitted doing so (otherwise you can't know!).”

David Fuller's view

I very much enjoyed Easter with my 3-generation family and it is always one of my favourite Spring breaks, not least because of the Friday-Monday holidays on either side of the weekend here in the UK.

Re central banks and their currencies: they frequently intervene, usually in the interests of maintaining an orderly market.  Why should Yellen announce an intervention, assuming that is what happened on 16^th March?  All that would do is set up a controversy, with every financial pundit in the markets second-guessing justification for the move.  Moreover, the most vociferous would be those who felt the intervention had cost them. 

Think of any central bank leader as a helmsman, trying to steer a sensible course for their currency.  If the intervention, usually a slight adjustment of the tiller, becomes public knowledge, that is usually a problem of ego and miscalculation.  Examples would be central bankers drawing a metaphorical line in the sand, which creates a target to breech for plenty of traders.

The house view at Fuller Treacy Money remains that the US Dollar will appreciate over the longer term, due to the USA’s technology lead and near self-sufficiency in energy.  We also know that Mario Draghi of the ECB wants a soft EURO, to help an economic recovery which could hold most of the single currency nations together.  Therefore, €1.05 is no line in the sand for the ECB.  Meanwhile, the US Dollar is no longer appreciating against every other currency and the EURO is no longer in freefall. 

Subscribers have lived thought decades of forex intervention, mostly done very quietly for the reasons touched on above.  However, there is plenty of information on this topic on the www.  Here is a brief sample.