U.S. Treasury Secretary Yellen reiterated that exchange rate intervention should be a form that is rarely used.shazamcasinopromocodesOfficials should issue appropriate warnings when taking action.
The former Federal Reserve chairman said in the Italian lakefront resort of Stresa on how countries such as Japan can respond to a stronger dollar. In 2017, she participated in the design of the current exchange rate system of the Group of Seven (G-7).
“shazamcasinopromocodesWe believe that intervention should be rare, that intervention actions should be communicated in advance, and should be mainly to deal with fluctuations in the foreign exchange market,"Yellen said. "We believe intervention is simply not a tool that should be used routinely."
Exchange rates do not appear to be a specific issue at the upcoming G-7 finance ministers 'meeting in Italy, although the impact of monetary policy divergence is particularly significant at a time when the Fed seems likely to keep borrowing costs higher than originally envisioned. Against this backdrop, the Bank of Japan recently suspected to intervene after the yen fell to a 34-year low.
Unless officials seek to reopen the issue, they are likely to follow consistent language in a communiqué released on Saturday, repeating their 2017 commitment to be "market-determined and closely consulted" on exchange rates.
"Overall, the view we have expressed, and the view expressed by the Biden administration on exchange rates, is that large market economies should adopt market-based exchange rates, and exchange rate trends should mainly reflect fundamental differences between different countries," Yellen said.
She also observed that the level of the U.S. dollar exchange rate reflected investors 'views on the trajectory of borrowing costs.
She said the strength of the dollar partly reflects interest rate differences and market perceptions of potential interest rate paths in different economies.