Although a number of officials, including European Central Bank (ECB) President Jean-Claude Trichet, Federal Reserve Chairman Benjamin Bernanke, and Japan Finance Minister Sadakazu Tanigaki, indicated the G7 and IMF statement did not signal a desire for a general dollar decline, the market suspects otherwise. It understands those comments as halfhearted attempts to maintain an orderly market.
The absence of clear, strongly-worded protests about the pace or magnitude of moves in the forex market is understood by many participants as acquiescence at the very least, and even possibly an endorsement. While the euro was motoring ahead, at least two ECB officials indicated (without, apparently, much prompting) that more aggressive rate hikes might be needed. The comments seemed to reflect the lack of concern about the euro’s appreciation.
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