Verbal Intervention for the U.S. Dollar in Forex Trading

Can verbal help be given for the greenback in currency trading?

Many policy makers are joining together to try and arrest the decline of the U.S. dollar in forex trading on the currency market. ECB president Jean-Claude Trichet has stated that a strong greenback in currency trading is important for the world economy. Today, with the news that ECB economic recovery is slowing, and with such statements fresh in the minds of forex traders, it is no surprise that the dollar is higher in forex trading.

However, how long can such verbal intervention help? The greenback has more serious issues in currency trading related to the U.S. economy. GFT’s Boris Schlossberg reports in FX360 on what is truly needed for the U.S. dollar to gain strength in forex trading:

While verbal intervention can slow down the pace of the decline, it cannot reverse it. The dollar remains dogged by the structural problems of the US economy, most importantly its alarming high unemployment rate and its ultra low short term interest rates. Until and unless the market becomes convinced that US short term rates will begin to rise, the greenback will rally only on safe haven flows.