Friday, October 29, 2010

More intervention from Norway

Norges Bank selling NOK 800 mm per day versus NOK 600 mm per day in October. This is 60% of their trade balance surplus. The intervention bandwagon to control currency appreciation is not just in Asia. Everyone is worried about exchange rate regardless of what the G20 may say in communiques.

The theme of controlled appreciation will play havoc on models of exchange rate determination and ill make it that much harder to plan for future trade. There is no easy solution. The control of trade through tariffs is no better and discussions of using capital capital control are a Pandora's Box of capital flow uncertainty.

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