Ack...
I ran across an interesting statistical note while exploring dollar activity vis a vis attempts at central intervention. Initiation of central intervention to support a currency's value has been historically taken to be a reliable signal to initiate or add to short positions in the currency in question. After all, if entire governments become concerned enough about the strength of their currency to "intervene", that currency is definitely in trouble. When foreign governments also aid in the intervention, the message is even more pointed.
February 1987 - Louvre Accord. Weak dollar, growing U.S. trade deficit and prospect of weakening U.S. economy raises concerns in Europe and Japan about further dollar weakening. G5 plus Italy meet at the Louvre in Paris and issue statement agreeing to ``foster stability of exchange rates around current levels''. United States, frequently in coordinated operations, intervenes a number of times to buy dollars.
The 1987 reaction to Feb currency intervention came home to roost in Aug, Sept and Oct that year. Chartwise the difference between now and then is that back then the market was trending up strongly as the intervention was implemented and the trend was sustained for several months...until...
Anyone that would be interested in tracking market activity in relation to dollar intervention should look at the charts during the following time periods. It appears that when intervention ceases,
chronology of intervention in foreign exchange markets by central banks from major industrial nations on the dollar, the yen, the German mark and the euro.
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Sept 17, 19, 21, 24, 26 and 27, 2001 - Bank of Japan intervenes to sell yen for dollars, worrying about an export-crippling rise in the value of the yen and following attacks on U.S. cities on September 11. September 24 and 26 intervention is not limited to the dollar but includes buying euros for yen, with European Central Bank (ECB) operating on behalf of BOJ on both occasions.
Nov 10, 2000 - ECB in conjunction with national euro zone central banks intervenes to buy euros.
Nov 6, 2000 - ECB and other euro zone national central banks intervene to buy euros.
Nov 3, 2000 - ECB and other euro zone national central banks intervene at least twice to buy euros, following the currency's five percent recovery from record lows set the previous week around $0.8225.
Sept 22, 2000 - Central banks in Europe, Japan and the United States, acting together for first time since 1995, intervene to drive euro higher after currency hits all-time low below 85 cents two days earlier, a loss of nearly 30 percent of its value since its January 1999 launch. Intervention is first by ECB since its birth.
January 1999 to April 2000 - Japan concerned too-strong yen, trading around 108 to the dollar in January, 1999, will choke off fragile economic recovery and intervenes in foreign exchange markets to tame its strength. Bank of Japan (BOJ) sells yen at least 18 times in this time period, including once via the Federal Reserve and once via the ECB. Despite intervention, yen continues to strengthen against dollar, reaching 102 by April 2000.
April-June 1998 - With yen weakening, BOJ intervenes to support its currency. As yen crumples below 144 to the dollar, U.S. authorities on June 17, 1998 join the BOJ, spending $833 million buying yen.
April 1994 - August 1995 - Dollar sinks to record lows against the German mark, reaching 1.41 in July 1995, and it hits post-World-War Two lows against the yen below 83 to the dollar in April 1995. From April 1994, United States intervenes repeatedly, often in concert with Japanese and individual European central banks, to prop up U.S. currency. The last coordinated intervention with European banks in this period takes place on August 15, 1995.
April-August 1993 - U.S. buys dollars and sells yen.
1991-1992 - U.S. and European central banks intervene repeatedly as U.S. economy tumbles into recession during Gulf War, which weakens the dollar. U.S. intervenes on both sides of market, spending more than $2.5 billion buying currencies and selling $750 million.
1988-1990 - Dollar trends higher. U.S. intervenes after Group of Seven statements on importance of maintaining exchange rate stability.
February 1987 - Louvre Accord. Weak dollar, growing U.S. trade deficit and prospect of weakening U.S. economy raises concerns in Europe and Japan about further dollar weakening. G5 plus Italy meet at the Louvre in Paris and issue statement agreeing to ``foster stability of exchange rates around current levels''. United States, frequently in coordinated operations, intervenes a number of times to buy dollars.
September 1985 - Plaza Accord. Group of Five - U.S., Germany, Japan, Britain, France - meet at Plaza Hotel in New York to discuss concerns about very strong dollar and U.S. worries about declining competitiveness. Following weeks see substantial intervention sales of dollars for other G5 currencies by U.S. and other monetary authorities.
1980-1981 - U.S. authorities intervene to tame strengthened dollar.
1978-1979 - Dollar comes under heavy pressure amid high oil prices, high U.S. inflation and deteriorating balance of payments. In November 1978 a major new dollar support program is introduced to raise a large war chest of up to $30 billion. U.S. intervenes forcefully and often in the market with other central banks.
After seeing over the last several days that there was an increase of shorting and put selling in certain issues prior to the attack on our home, I would certainly expect the dollar to come under attack as well. I had mentioned the aspects of an acceleration in the downtrend of the Dow chart starting 3 days before 9/11. It did not at the time occur to me that the nature of that aspect could be due to a large sum of money with prior knowledge of the hijackings. Looking at those 3 days now, and seeing the predicament of the dollar, I might have to conclude that there's actually a much larger war about to be waged than has that which has been spoken of.
Doug R |
