Japan, U.S., Europe secretly agreed to defend falling dollar during March financial crisis: Prepared concerted intervention
The Nihon Keizai Shimbun has discovered that with the dollar plunging due to the financial crisis in the U.S. triggered by the subprime mortgage debacle, monetary authorities of the U.S. Europe and Japan secretly agreed to defend the dollar through concerted currency intervention to buy dollars.
Their aim was to prevent the plunging value of the dollar from creating havoc in the global economy. They also prepared an emergency joint statement aimed at stabilizing the exchange market. U.S. President Bush was cautious about currency intervention, but he apparently felt he had no choice but to change his policy in the face of a serious trend of investors moving away from the dollar. It is almost unprecedented for the U.S. to take the lead in a move to defend the dollar. The dollar crisis is still lingering due to financial troubles for housing companies in the U.S. Chances are that currency officials of those countries might search for cooperation again.Sense of crisis concerning key currency
According to several international monetary sources, currency officials of those countries started boiling down measures to defend the dollar in mid-March, when the financial troubles at U.S. investment bank Bear Stearns Cos. surfaced, triggering renewed concerns about the financial system. The dollar and stocks had continued to plunge. In response to the wishes of the U.S., which was increasingly alarmed about the situation, currency officials of the U.S., Japan and Europe held telephone talks on the weekend of March 15-16. They coordinated views on ways for concerted currency intervention.
Gist of agreement among Japan, U.S. and Europe
- In the event of a decision being reached that there is a strong fear of the dollar taking a nosedive, concerted intervention should be carried out.
- Consider issuing an emergency statement through the Group of Seven industrialized nations.
- Japan supplies yen funds to the U.S. for yen-selling and dollar-buying.