Will Dollar Strength Trigger Intervention?

CAMBRIDGE â?? Only a small group of central banks refrain from intervening in the foreign-exchange market to stabilize their currenciesâ?? exchange rate or coax it in the desired direction. Even when they do not intervene directly, their interest-rate policies are often formulated to be compatible with exchange-rate objectives. As a result, freely floating currencies are comparatively rare. This has important implications for the United States authorities as they confront a sharp rise in the dollarâ??s exchange rate.