How currency intervention is done
Via Seeking Alpha, I just read an interesting post by David Merkel about how Governments go about doing currency intervention… I found it to be particularly informative considering the USD isn’t doing so well and they’ll probably intervene soon.
There are rules to effective currency interventions. There may be more than four, but here are the four that I know:
- Do the intervention on a day when the economic releases favor a stronger US Dollar.
- Do the intervention when traders are overconfident, and pressing their bearish dollar bets too aggressively. Catch them leaning the wrong way.
- Don’t do it alone. You will fail. You must get the central banks of most of your major trading partners to go along to create an impression of unanimity.
- Do it BIG. This is not a time to hold back; either do it BIG, or don’t do it at all. You want the currency traders to wish they had never taken up the profession.
Read the full post here, it’s well worth it, particularly to those of us that haven’t been around for a long time 
Filed by Popeye at October 1st, 2007 under Finance, FOREX, Trading