Close to 0% probability of coordinated G10 FX intervention to weaken USD this year – Danske Bank

Economists at Danske Bank discuss the likelihood of broad-based global coordinated FX intervention with the intent to weaken the USD. In their view, FX intervention to weaken the USD is currently not aligned with US incentives to bring down inflation.

Low probability of coordinated USD FX intervention

“We still think the probability of broad-based global FX intervention to weaken the USD is very low; close to zero percent by end-2022 and 10% by end-2023.”

“A necessary condition for coordinated G10 FX intervention is the US supporting such action. As long as US inflation pressures are high, we do not expect such support.”

“We warn against regarding FX intervention as an appropriate tool at this stage. In our view, recent FX moves are fundamentally justified, FX intervention would only increase market volatility and a weaker USD only adds inflation pressures.”