My personal opinion is this week's rebound in the dollar is the product of US currency intervention along with other well known measures currently being done to, literally save the US financial markets from exploding.
In June, Paulson refused to rule out currency intervention:
$this->bbcode_second_pass_quote('', 'U').S. Treasury Secretary Henry Paulson Monday declined to rule out intervening in currency markets to stabilize the dollar, but said strong long-term U.S. economic fundamentals would "shine through" in the dollar's value. (See video below)
"I would never take intervention off the table or any policy tool off the table." Paulson said in an interview on CNBC. "I just can't speculate about what we will or won't do."
PeakOil is You
US Currency Intervention
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US Currency Intervention
by seahorse2 » Wed 23 Jul 2008, 17:51:40
CNBC
He reiterated that position the next day:
$this->bbcode_second_pass_quote('', 'W')ASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson on Tuesday said he stood by comments made a day earlier in which he said he would never rule out currency intervention as a potential policy tool.
"I'll let my comments stand," Paulson said in an interview with Bloomberg Television. "I never like to say never, but my focus is on long-term fundamentals."
Reuters
On June 21, 2008, the "Telegraph" ran an article that expressed the entire world's fear, that the world was at a breaking point.
$this->bbcode_second_pass_quote('', 'I')t feels like the summer of 1931. The world's two biggest financial institutions have had a heart attack. The global currency system is breaking down. The policy doctrines that got us into this mess are bankrupt. No world leader seems able to discern the problem, let alone forge a solution.
My emphasis.
Telegraph
Last week, we know that the US was busy desperately trying to save Freddie and Fannie, which, if lost, would literally decimate the US and most likely most other gov't financial systems. The US is saving F&F first by shoring up their stock price by prohibiting "naked" short sale of listed financial institutions (which include F&F).
USA Today
Stopping short selling and shoring up stock prices, this allowed the announcement by Freddie, just days later, that it would issue stock to raise capital, even though just previously Paulson and others said they were well capitalized.
Now, who in their right mind would buy shares in either of these two behemoths? The US gov't of course. US Sec/Treasure Paulson wants a blank check to shore up these two ailing institutions and, as part of the aid package, become a shareholder in them.
$this->bbcode_second_pass_quote('', 'P')aulson was asked about his request that Congress remove limits on how much money Treasury can lend to the troubled mortgage finance firms - was it just a "blank check" from taxpayers? He also faced questions about a second part of the plan - to allow Treasury to buy equities in the firm - and whether Fannie and Freddie are as safe as the companies, Treasury and regulators now claim.
CNBCMSNBC
So, I end by saying just a week or so ago, the US and the world were in a desperate situation. The dollar was crashing, gold was rising exponentially, and the US took serious intervention in all markets, which I believe includes the forex markets. As Paulson said in the first quote I gave, he would never admit intervening in the dollar even if he did. Now, you decide if anything that has happened is strong dollar or if it wreaks of intervention.
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