Monday, November 12, 2007

Why it's so tough for other central banks to stop the dollar decline

From Yves Smith:
In a sign of increasing desperation, some central banks are imposing currency controls in an effort to arrest the dollar's decline. Oddly, none of them seem to be taking the most direct measure, which would be to sell their own currency. This may be due to the fact that traditionally, the job of trying to shore up a battered currency has fallen to its own central bank, and it's generally a losing battle, since weak currency countries general don't have abundant reserves. The alternative would be to cut rates, but that can stoke domestic inflation.

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