JPMorgan: Cannot rule out a turn toward a more interventionist currency policy in US

Bloomberg today reported that Michael Feroli, JPMorgan Chase & Co.’s chief U.S. economist, pointed out the possibility of the U.S. intervening in the FX markets to manipulate the USD valuation.

“While not our base case scenario, we cannot rule out a turn toward a more interventionist currency policy, particularly since the current administration has, at times, hinted at a preference for dollar weakness or objected to perceived Chinese currency manipulation,” Feroli said in a research note and elaborated further:

“We believe the Fed would fall in line and play their usual role of following Treasury’s lead on dollar policy. However, currency intervention would likely have no effect on monetary policy, since the central bank would likely sterilize the transactions by purchasing an offsetting amount of U.S. securities at home, thus leaving the monetary base unchanged."