Don't sweat central bank FX intervention

Wells Fargo Research Team Wells Fargo

Summary

Since May 2020, the U.S. dollar has broadly weakened against most G10 and emerging market currencies. However, some foreign central banks and policymakers have indicated unease in the renewed strength of their respective currencies. Over the past few weeks, some central banks have also directly intervened in FX markets to weaken their currencies, while others have engaged in FX reserve management operations to rebuild external buers. While the immediate market reaction to announced FX measures has been a sello in local currencies, we believe broader market forces will ultimately prevail, and central bank intervention will not be enough to halt the longer-term trend of a weaker U.S. dollar.

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Wells Fargo Research Team

Wells Fargo

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