• Home
  • Analytics
  • Market News
  • FX intervention by Fed seems unlikely – Standard Chartered

Market news

13 August 2019

FX intervention by Fed seems unlikely – Standard Chartered

Analysts at Standard Chartered do not believe an imminent US FX intervention is likely but suggests that neither is it impossible.

  • “If the US Treasury intervened in FX markets to support the USD, the Federal Reserve would have a number of alternatives. We do not expect Fed to stand pat if the Treasury intervenes,  even if this it is a theoretical possibility. Ultimately, we believe the Fed’s decision will be driven by what signal it wants to send to the markets and whether a stronger signal is perceived to carry greater political upside or downside risks relative to a weaker one.
  • The strongest message to the markets would be intervening alongside the Treasury and not sterilising. Nevertheless, for political, monetary policy or institutional reasons, the Fed may prefer a less aggressive stance.
  • For instance, it could coordinate the timing of a policy rate cut with a Treasury intervention even if it did not join in intervention. The Fed could also intervene along with the Treasury close to a policy rate cut and nominally sterilise the intervention. The rate cut would effectively unsterilise Treasury intervention. The Fed could also help finance a larger Treasury intervention by raising the warehousing limit, though we believe a substantial increase in this limit is unlikely, as it would involve considerable political risk.
  • Given limited precedents for these options against the backdrop of a sizeable Fed balance sheet, it is hard to convincingly argue which option the Fed would choose and how market participants would respond. Neither we, the Fed nor market participants have much precedent to lean on. However, in any FX intervention that is unsterilised or is closely followed by a rate cut, the eventual flow of reserves would be expected to put downward pressure on US money-market rates as foreigners either exchange USDs back to local currencies or invest directly in US assets.”

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

Open Forex Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
37 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2019 TeleTrade-DJ International Consulting Ltd

TeleTrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.

The company operates in accordance with Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. TeleTrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies. You may change your cookie consent or view our cookie declaration here.

TeleTrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

All analytic materials by TeleTrade is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.