The US dollar rallied fast and furious last week. The dollar rally was the biggest in 8 years vs. the Euro. This immediately brought out calls of Dollar Intervention such as the one below. Note: the arrow and circle in deep blue were added by me.









click on chart for sharper image



The very large drop recently (the pale blue line) tells part of the story. Another part is told by the Treasury site itself - that recent data about the drop was delayed for almost three weeks before it was made public.



Another part is told by very recent data not being made public for the last two weeks running.



What the ESF did is simply sold about 10 billion Euros and bought dollars - plain and simple massive intervention that virtually everyone has missed or ignored or pretended doesn't exist or whatever.



The raw facts are sitting there at U.S. International Reserve Position.

Mystery Solved

On July 15th the US Dollar Index closed at 71.87, the lowest close since reaching its record low in April. However, rather than continue lower and fall off the edge of the cliff, the Dollar Index suddenly and mysteriously reversed course. It has now risen on 12 of the 17 trading days since reaching that low, and closed today at 74.55, a 5-month high. What caused this index to suddenly pull back from the brink and then reverse course to shoot higher over the past three weeks?



There has not been any news exceptionally favorable to the dollar. In fact, the banking problems in the United States continue to mount, while the federal government's deficit continues to soar out of control. On July 28th Reuters reported that "The Bush administration on Monday plans to project the U.S. budget deficit will soar to a new record...because of the slowing economy and an economic stimulus plan approved this year."



So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. ...

Oil was falling which would help the US balance of trade.





Container shipments into the US were weakening which would also suggest an improvement in the balance of trade.





Economic activity in Europe had started to crater.

$USD - US$ Index Daily

$USD - US$ Index Daily

Marc Faber Weighs In

Can Currency Intervention Halt the U.S. Dollar’s Nosedive

The story below from the Associated Press, the largest news agency in the world, may be most notable for acknowledging the potential for government intervention in the currency markets -- market manipulation, really -- and for reporting the surmise of an expert in the energy business that oil has been monetized, replacing the U.S. dollar as the world currency, becoming the "new gold."

It would take great sums of money to make any difference. The foreign exchange market is the largest in the world, with over $1 trillion traded each day.

Intervention advocates must believe that if the European Central Bank (ECB) and a few other central banks joined the fray, that a better outcome would be achieved. However, any additional efforts to artificially prop up the ailing dollar will be equally ineffective.



Even if ECB intervention could slow the dollar’s descent, what possible reason would the Fed’s European counterpart have for doing so? The ECB is already concerned about inflation and is preparing to raise rates as a result.

A Look At Japan's Intervention in 2003-2004

Why is Japan intervening? Because it believes the yen needs to be held down to keep Japanese exports competitive.



The policy of intervention began in earnest in August last year, when the decline of the dollar gathered pace. In 2003, the Japanese government spent $100bn buying dollars in an attempt to hold down the value of the yen. In the first two months of this year, it spent another $100bn. And Japan’s parliament has authorised the spending of a further $360bn this year.

Yen vs. Japan's Intervention 2003-2004

massive

The Primary Trend Cannot Be Suppressed

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