g'day all - dear JPN, you sez "If Japan, Hong Kong and China have all these reserves to defend their currencies, don't you wonder why the US had to intervene last week (weak)?"
IMHO, US action in the prior week was psychological warfare. Analogous to a company's stock buyback [which may be good or ill devised,] a nation's reserve should be used to support the whole financial infrastructures, of which the currency stability is a major component. More important though, in the world of currency trading, $2B isn't a lot of money. Remember the case of Mr Soros, he won $1B against the pounds. Of course, he also lost alot against the eurobonds [although I do think "Maha-thug" was making the former a scapegoat of his country's woes this time.] Speculators prey on the vulnerable, especially the isolated. Now, when US implicitly pledges her resource, people will think twice. As Zeev has pointed out, maybe there are still people too tempted not to resist to test the level of tolerate, but certainly they will be watching their back. Thus, currency volatility will become range bounded.
Therefore, IMHO, my conclusion is that the US was making a strong statement and any savvy speculator should heed to her message [To see a weak hand, remember Suharto's daughter selling $50,000 USD a few months ago - now that is a lame hand!]
best, Bosco |
