2009-10-17 07:16:39 - “Mann International”: The US Federal Reserve may intervene to prop up the dollar.

“Mann International” analysts are thought to believe that the time is fast approaching where the US Federal Reserve may step in to the currency markets to defend the value of the dollar.

The US currency has fallen consistently against those of its six most active trading partners as investor concerns mount that the US government is locked into its zero interest rate policy. The current declines in its value were exacerbated by the decision of the Reserve Bank of Australia to raise its benchmark interest rate by 25 basis points thereby becoming the first of the major economies to begin reversing monetary stimulus.

“Mann International” analysts believe that this action shifted attention on to other developed economies and the outlook for interest

rate levels in the months going forward.

The overwhelming consensus is that US unemployment and the precarious state of the economy reduce the likelihood of a rate hike in the world’s largest economy as it is feared such a move would stifle the already fragile recovery but “Mann International” sources suggest that the recent surge in US equity values and slowing rate of job losses may give the Fed a reason to begin modest monetary tightening to defend the dollar.

Although “Mann International” does not believe currency market intervention to be a strong likelihood, one of the sources pointed to the UK’s bid to defend the pound before its currency was ejected from the ERM (Exchange Rate Mechanism) in 1992 as an example of the perils of trying to manipulate the currency markets.

More likely, the sources suggest, is the ending of the Fed’s treasury buy-back scheme (quantitative easing) which could restore some modicum of faith in the world’s reserve currency.