美国干预外汇市场分析框架

1、Executive summaryWhyisbeingdiscussed?TheprospectofaninterventionbytheUSto weakenUSDremainsanoft-discussedmarkettopic.USDhasbeenappreciatingona multiyearbasis,particularlyagainstemergingmarkets,andweestimatethatcurrently about 10% overvalued. Moreover, the US administration has expressed concernsover

2、theissuesoftradeimbalancesandforeigncurrencymanipulation.However,despiteincreasedfocusonthistopicbyinvestors,wethinkthatthemarket lacksacomprehensiveunderstandingofhowinterventionworks,andaframeworkfor judgingitsprobabilityandanalyzingitsimpact.HowgaugetherisksofanimpendingInassessingthelikelihoodof

3、an intervention,wewouldlooktoseveralfactors.Iftheadministrationviewstrade negotiations as making insufficient headway, that there an increased perception of competitivedevaluationsabroad,thattheFedfelttobeinsufficientlydovish,orrealizeddataandtheeconomicoutlookbothsoften,therisksofinterventionmayris

4、e.ThemarketmaybeunderestmatngtheeasewthwhchtheUScanntervene unlaterally.TheSecretaryoftheTreasury,wththeapprovaloftheresdent,can ntervenentheXmarketwthoutprorConressonalauthoratonthrouhts EchaneStablatonundES.hleUSXpolcysnce1995hasbeenpassve,wth thethreesubsequentnterventonstakngplacesncethen199,000

5、,011)beng doneatthebehestofforenpartnersandntokenamounts,thsandtheUSstrong dollarpolcycanbothbechanedunlaterally.eestmatethattheESFhasUS$678bllonnassetswhchcanbesoldtoweaken USDentrelyunlaterally.undngbeyondthscanbeobtanedbutthsrequresthe assentoftheederalReserveSystem,Conressand/orforenpartners.The

6、ESFs farlyunconstranednthecurrencesnwhchtcouldntervene.Would an successfully weaken USD? Not necessarily. We judge the effectivenessofaninterventionasdrivenbythreekeycriteriatheoperational parametersof theintervention,theperceivedcredibilityandeffectivenessoffutureUS policyactionandtheresponseoffore

7、ignpartners.AUSD-weakeninginterventionlikelytobemoresuccessfulcoordinated(withtheFedand/orwithforeign partners),signalledandunsterilized(theFedsbalancesheetincreases).However,foraninterventiontoweakenUSDsustainably,investorswouldneedtoview additionalpolicyactionsbytheUSasbothmoreprobableandeffective

8、weakening USD,andpricethisaccordingly.Iftheinterventionviewedasaone-and-done,price action would likely belimited.TheFedsresponseherecritical,andwearguetherearegoodreasonstothinktheFed wouldbereticenttocooperatewiththeTreasuryaUSD-weakeninginterventiongiven thepotentialriskstoitscredibilitytheeyesoft

9、hemarketasanindependentbodyand giventhatFXnotaformalpartofits HYPERLINK /faqs/money_12848.htm Congressionallymandatedobjectives(maximum employment,stablepricesandmoderatelong-terminterestrates).Tothisend,anyimpact on the Feds balance sheet would likely be sterilized. Rhetoric from Congress in respon

10、se to intervention should also be watched.Exhibit 1: Summary of our viewsCourse 1: A verbal interventionore2:AltrlpolytCourse 3: A new Plaza AccordCourse descriptionUS formally announces intent to intervene conditioned on certain events, but stops short of formal interventionUS actively intervenes u

11、nilaterally and announces a formal change to US FX policyA coordinated, multilateral agreement to weakenUSDthroughinterventionand/or coordinated global policychangesUSDUSD falls 5%appreciationlower.However,scenariosfallingwithincourse1may seelimitedpriceactionasmoremitigatescertainoutcomesthangenera

12、testhem.That is,course1scenariosmaypreventastrongerUSDmorethangeneratesaweakerone.Ce2:AlaallyftIncourse,theUSadmnstratonntervenesntheXmarketandannouncesachane nUSXpolcyaroundthetmeofthenterventon,perstandardoperatngprocedure seeHowarenterventonstypcallyconducted?.Interventonsncourse2couldncludeavare

13、tyofoperatngparameters.Itmaybea tokensearoundUS$1bllon,consstentwththepastthreenterventonsn199, 000and011)orlarer.Thecurrencyorcurrencestaretedcouldvary.The nterventonwouldlkelybesnalledastwouldbeaccompanedbyaformalpolcy shftwhchwouldbeasnal)and,becausetsunlateral,wouldunlkelybe coordnatedwthothertr

14、adngpartners.Itmayormaynotbecoordnatedwththe ederalReserve.Iftscoordnatedwththeed,twouldlkelybesterled,thouhths wouldbeanmportantparametertowatchftsnot.Asnalled,uncoordnatedand sterlednterventonmaybethemostlkelyncourse,thouhthevarous combnatonssuestwecannotmakethsanoperatngassumpton.Marketsarelkelyt

15、ovewscenarosfallngntocourse2asacredbleshftnUSpolcy. Thecombnatonofaformalannouncementofashftnpolcy,coupledwththe snallngeffectofannterventonannterventonbengaclearsnalofntent)would lkelybesuffcentformarketstonferthattherskoffutureactons)hasrsen.ewouldepectUSDtoweakenmoreunderscenarosfallngntocourse2t

16、hann course1becauseoftheformalshftnpolcy,thenterventontselfandthemarket prcngnareaterrskoffurtheractonastheadmnstratonsntentssnalled.The magnitude of the immediate reaction would be driven by the operational parameters(size,signalling,coordination,sterilization,currencieschosen).However,the magnitud

17、eofthesubsequentreactionandwhethertheinitialmovesustainedarea functionofhowothersrespondandwhatmarketsviewasthemostprobableandmost crediblenextsteps.Ifpushbackfrommarketparticipantsand,moreimportantly,foreign countriesconsiderable,themarketmayviewtheactionsasaone-and-donewhichare unlikelytobesustain

18、ed.Thisparticularlytruetheinterventionunilateralandthe TreasuryexhaustsitsUS$67billionfundswhichcanbedeployedunilaterally.Course 3: A new Plaza AccordScenarioscourse3arelongertimehorizon,aremorelikelytoleadtoasubstantial andsustainedweakeningUSDandarearguablymorechallengingtoachieve.Scenarioscourse3

19、involveacoordinated,negotiatedandactivepushbytheUS,along with itstradingpartners,toweaken USDthrough FXmarketintervention,structural and policy reforms, orboth.Thesescenarosarelkelytoresemblethe195laaccord.Intheearly190s,the combnatonofthtUSmonetarypolcytocombatthehhnflatonfromthe1970s, looseUSfscal

20、polcyandslushrowthabroadledtoamateralUSDapprecaton nearly100%from190-5ntheDY.InordertocombattheUSDstrenth,n September195theG5areedtontervenentheXmarketonacoordnatedbassto weakenUSD.Ths,ncombnatonwthlooserUSmonetarypolcy,asmallerUSbudet defctandcommtmentstoreaterfscalspendngnGermanyandJapan,enerateda

21、 50%declnentheDYbetweenSeptember195andDecember197.InterventiontheFXmarkettoweakenUSDwouldbecoordinatedwithatleastone othermajortradingpartner,andthemarketwouldinferthatthebroaderinternational community was at least passively supportive of the action no major countries activelyresisting,eventheyareno

22、tactivelyparticipating).Importantly,thesescenarios wouldalsobejoinedby structural reforms. HYPERLINK /chapters/c13542.pdf Academicliteraturesuggeststhatduringthe PlazaAccordyears,wasthepivotglobalmonetaryandfiscalpolicythatplayedthe biggestroleweakeningUSD.Scenarosncourse3ncludngcoordnatednterventon

23、butwthoutmajorpolcy chaneswouldlkelystllseeaweakerUSDthanncourses1and.Thssbothbecause acoordnatednterventonprovdesmorefrepowerasforenmonetaryauthortes holdafarlareramountofUSD-denomnatedreservesthantheES)butalsobecause tconveysnternatonalsupportandthuscredblty.However,toseethelarest mantudeofaUSDdec

24、lne,wewouldalsobelookngtoseehowfscalandmonetary polcesevolve.Centralbanksarendependentsotherpolcyactonsmaybedrven morebytheeconomcoutlookthanbypoltcalconsderatons.However,fscalpolcy canbedetermnedbypoltcans,andthusreaterfscalepansonabroadmaybethe keyforceeneratngUSDweakness.How likelihood of interve

25、ntion? Assigningaformalprobabilityonaninterventionchallenginggivenboththesizeable numberofpossibleoperationalparametersandeconomicconditions,butalsobecause therearefewhistoricalguidepostsonwhichtobaseonouranalysis.Rather,weprovide certainconditionsthatwefeelraisetheriskofinterventiontakingplace.Adve

26、rseeconomicInterventionmoreprobableourviewUSeconomic dataandtheeconomicoutlookbothslow.AweakerUSDreflationaryandwould enhancetheattractivenessofUSexportsrelativetoimports.Thus,theincentivetotry toweakenUSDrisesastheUSeconomysoftens,ourview.Insufficientonnegotiations:Arguably,theriskofinterventionris

27、esthe USadministrationviewstradenegotiationsasmakinginsufficientheadway.Allelse equal,aweakerUSDhelpstonarrowtheUStradedeficitandthusinterventioncould beusedasanalternativemeasuretoachievethisgoal.Moreover,interventioncouldbe seenbyforeignnegotiatorsasasignaloftheadministrationsintent,andthuscouldbe

28、 usedasanegotiatingtactic.Increased perception of competitive devaluations abroad: If the US administration observes policy actions by foreign countries (e.g., monetary policy, fiscal policy, trade policy) as purposely designed to weaken their own currencies against USD, the probability of intervent

29、ion (or what would be perhaps articulated as counterintervention) would increase.InsufficientlydovishFed:IftheadministrationviewstheFedasinsufficientlydovish,we would view the probability of intervention as rising. This because intervention to weakenUSDmayseenasstimulativebyeasingfinancialconditions

30、andsupportingrisk assets, all else equal. If the Fed perceived by the administration to not be accommodativeenough,interventioncouldbeviewedasanimperfectsubstitutefor monetaryaccommodation.What the marketpricing?Sheena ShahUSD volatility: Low on a historical basis (1 standard deviation below average

31、).USDNeutralouttomultipleyearsasinvestorsassignequalvolatilityforUSD appreciation anddepreciation.UDFXfa:akrUD4%nayearstmeand9%nfveyearstme.Interest ratedfferentalsUShherthanDM)meanXforwardsprceaweakerUSD. P:aallylgwthleveraedfundsnetlongespecallyversusEURand GBPDY+%ofopennterest.ssetmanaersarenetsh

32、ortUSDsothereslessrsk ofanunwndhere.Marketsassignonlya17%probabilityofa10%depreciationUSD(versusEUR)the comingyear.Thisprobabilitylowbecauseoflowexpectedvolatilityandskew(risk reversal) aroundzero.Exhibit 6: USD expected volatility is historically lowSource: Bloomberg, Macrobond, Morgan Stanley Rese

33、archExhibit7:Marketsdontpriceabigdirectionalmovethenext year =0)Source: Bloomberg, Macrobond, Morgan Stanley ResearchExhibit 8: USD FX forward prices weaker USDSource: Bloomberg, Macrobond, Morgan Stanley ResearchExhibit 9: Leveraged funds are net long USDSource: Bloomberg, Macrobond, Morgan Stanley

34、 ResearchWhat could cause a pick-up in USD volatility? Implied volatility likely stays high if it impacts equities negatively. Realised volatility should pick up if the intervention actually causes USD to move into a downtrend.FX, and volatilityimplicationsDavid Adams, Sheena Shah, Andres Jaimesnote

35、dnOurframeworkforevaluatngannterventon,thechefdrversoftheUSD reactonaretheoperatonalparametersofthenterventontself,themarkets perceptonoffutureactonbothntermsofprobabltyandlkelympactofthose futurepolces)andthereactonofforenpartners.hlethecombnatonofpossble scenarossconsderableandhardtodetal,weprovde

36、threebroadcoursesunder whchnterventonmhtoccur:Averbalnterventoncourse1,aunlateralpolcy actoncourse)andanewlaaccordcourse.How would USD react in our three courses?USD weakness would be in the against which the US Thisbothbecauseofthefloweffect(theactualeffectofUSDsellingthemarket)butalsotheperception

37、thattheUSmostconcernedaboutUSDstrength against thatspecific currency.Currenciesindirectlylinkedwouldalsosoften.Forexample,theUSintervenesto increaseEURUSD,currenciestiedtoEURdirectly(suchasDKK)orindirectly(suchas CEEMEA currencies) would likely also strengthen against USD. Similarly, the US interven

38、esagainstUSDCNH,otherAXJcurrenciesmightalsostrengthenagainstUSD, giventheirtradelinkagesbutalsobecauseoftheperceptionthattheUStargeting export-orientedAsianmanufacturing-heavyeconomies.Exhibit 10: Summary of FX implications of intervention 1:A 2:Apolicyshift3:AnewUSD initially down 2%, as much as 10

39、%falls2%inonfuture andforeignMultiyear USD decline of 20% or moreEMFXastheoffsetsaUSD volatility rises as a trend is formedas the FX realized volatility could rise if a USDLittle(fadeatrend is formed. Implied volatility riselimited if global growth is strongerSource: Morgan Stanley Researchne,UDakss

40、lklyldor2%:Averbalwarnngof nterventonwthoutformalactonslkelytoenerateamarnalamountofUSD weaknessfthemarketcredblyreprcesthedstrbutonofprobabltesawayfromUSD strenth.However,thelackofformalnterventonsueststhattheprceactonmaybe lmted.notherfactorwllbetheprecsecondtonsunderwhchformalnterventon couldtake

41、place.Thats,ftheUSprovdesudancethattwouldnterveneunder condtonswhchthemarketvewsasunlkelytotranspre,thenthereprcngof probablteswouldbefarlylow.Thus,becauseofthesetworeasons,weviewpriceactioncourse1aslikelytobe limitedtothecurrencypair(s)mentionedprovided)andfairlylimitedscale.Ce2ldeanal2%leneatadat

42、leoashas0%negk:USDweaknesssaanlkelytobe mostconcentratednthecurrencesaanstwhchtheUSsntervenn.Thental reactonnXcouldbesmlartothemantudesseennthepastthreenterventonsn 199,000and011USDweakenedbyanaveraeof.However,wearecautous napplynghstorytotodayaskeyoperatonaldfferencesest.Thesenterventons weresnalle

43、dandsterled,aswewouldepectafuturenterventontobe,but mportantlytheywerealsocoordnated,thusenhancngtheeffectvenessofthe operaton.orthsreason,wethnkthat%smorelkelyventhatncourse2an nterventonwouldbeunlateral.ormoreonhstorcalnterventondata,seeppend: HstoryofUSXnterventonspost-Brettonoods.USDweaknesscoul

44、dcontnueafterthental%move,thouhthswoulddependon theforenreactonandhowmarketsvewtheprobabltyoffurtheractons.Aformal chanenUSechaneratepolcyawayfromtstradtonallyheldstrongdollarpolcy wouldbeapotentalsnaloffutureacton,thouhforUSDtoweakenfurtherthe marketwouldhavetovewthesesubsequentactonsasbothprobable

45、andlkelytobe successful.oreample,polcesseenasrestrctn,mpedngorreducngtheflowof captalntoUSassetswouldbeseenasUSD-neatveandmayenerateconsderable prceacton,butndongsoUSfnancalcondtonsmaythten,worsenngthese polcesappeal.urthermore,USDwouldlkelyweakenfurtherftheforenreactonandthereacton amongmarketpartc

46、pantswasbenn.Incourse2forenactorsmaynotactvely partcpatenaunlateralUSmove,butfthereactonsmuted,marketsmayvewthsas tactacceptance,rasngtheprobabltyoffurtherUSDweaknessandreducngthe probabltyofsubsequentUSDstrenthdrvenbycounternterventon.hleaweakenngofmorethan10%spossble,wearuethatthssunlkelytotake pl

47、acewthoutstructuralreformsand/orforenpartcpaton.Thus,wearuethatthe raneofmostlkelyoutcomesncourse2wouldbea-10%USDdeclne,concentrated ntheparstaretedbythenterventon.ThempactonbroaderUSDndceslkethe DYorthetrade-wehtedUSDwoulddependonthecurrencesselected.evew10% deprecatonastheupperboundnscenarosfallng

48、ntocourse2bothbecauseUS polcy-makersmayvewthsasasuffcentlylaremovebecausethswoulderasethe current10%overvaluatonasnotednEhbt5)butalsobecauseforenpartnersmay vewareaterthan10%rectnnthercurrencesasunwelcomenthsstateofthe world.Ce3ldealarUDlef20%r:Scenarosncourse3 nvolveamultyear,loballycoordnatedproce

49、sstoweakenUSD.Inthesescenaros nterventonwouldlkelyoccurbutbecoordnatedwthatleastonemajorpowerlkely multpleones)andwouldalsonvolvestructuraleconomcreformsdesnedtoweaken USD.Becauseofths,USDweaknessmhtbemostpronouncedaanstpartes partcpatngalongwththeUS,butUSDweaknesswouldlkelybebroaderthann courses1an

50、d.Thssbecauseaprocessnvolvngstructuralreformswouldlkely affectthemovementoflobalcaptalflowsassavns-nvestmentmbalancesshft, fscal/monetarypolcymesarealteredandrowthandnflatonepectatonschane. saresult,theUSDweaknessnthesescenaroswouldlkelybelarer,butalsomore wdespread.Estmatesoftheprecsemantudearechal

51、lenn,partcularlyforsuchalare-scale shftnlobalpolcy.USDbasedonourpreferredmeasures,asnotedearler,sabout 10%overvalued,sowewouldfndtunlkelytoseeUSDdeprecatebylessthanthat. EstmatesofhowmuchofaUSDdeprecatonwouldbeneededtonarrowtheUS currentaccountdefctvary,buta HYPERLINK /files/739 back-of-the-envelope

52、statccalculatonsuestsa tradedefctnarrowngof1%ofGDPwouldrequrea15%deprecatonnUSD.stheUS tradedefctoodsandservces)sabout%ofGD,thssueststhata45% deprecatonwouldbeneededtofullyoffsetths.Ofcourse,whenwencorporate dynamcfactors,therequredfallslkelyless.A1%fallnthetrade-wehtedUSD booststradevolumesby60-0bp

53、andaweakerUSDsloballyreflatonaryandwould lkelysupportlobalrowth,perhapsnarrowngthedefctbyrenderngUSeports moreepensve.TheUSsalsolkelytobecomeaneteporterofol,suestngthatthe tradebalancemaynaturallyshrnkovertmeforstructuralreasons.saresult,wevewa0%deprecatonasplausble.ItwouldputtheDYandtrade- wehtedUS

54、Dbothbacktowards005-15levels.Itwouldleadtoanundervaluatonof USDandwouldnarrowthetradedefct.tthesametme,twouldnotbesuchan aressvedeprecatonsoastoconcernothercountres.hlethercurrenceswould apprecate,tmaynothavesuchadeleterousmpactonthertradebalancepartcularly fthepostvemacroeconomceffectsnotedabovetak

55、ehold)andcouldbetolerated.hywouldtheUSDmovebesmallerthanseennthe190sunderanewlaa ccord?snotednOurframeworkforevaluatngannterventon,theDYrosenearly 100%from190-5,andfollowngthelaaccordtsubsequentlyfellabout50% fromSeptember195-December197.Incourse3wedontvewmantudessuchas seennthe190saslkely,venthatUS

56、Dsnowherenearasovervaluedtodayast wasthen.Relatveto,nearly195USDwas40%overvaluedonaDY-wehted bassEhbt4.Today,thatnumbers10.Thus,themantudeofthecorrecton requrednthe190swasfarlarerthansrequredtodaytonarrowlobalmbalances.Context is critical when evaluating potential implicationsUltimately,though,conte

57、xtiskey.TheFed,andfor USDthanUltimately,though,wearemindfulofcontexthere.Whilewe canestimatehowUSDmightperformthesedifferentcourses,thelargestdriverof USDgoingtobethemonetarypolicyandeconomicoutlook.Asaresult,weneedto incorporatecurrentcontextintotheframework.Thetwobiggestpointsofdiscussionthemarket

58、relatetotheFedandtrade,bothofwhichhaveaconsiderableimpactonthe economicoutlook,capitalflowsandthusUSD.AhawkishFedbluntsUSDweaknessdespiteTheFedhasaconsiderable impactonUSD(perhapsunsurprisingly).Scenariosfallingintoanyoftheabovecourses takingplace,conditionedonahawkishFed,arelikelytoseeamorebenignUS

59、Ddecline, whereastheytranspiredalongsideadovishFedthatwouldbeadoublewhammyfor USDweaknesswhileadovishFedenhancestheUSD-weakeningImportantly,notjust theactofcuttingratesthatdeterminestheFedbeingdovishmarketexpectations arekey.Asnotedpreviously,eventhemarketcutsratestwomoretimesasour economistsexpect,

60、thismaynotbesufficientlydovishtoconvincethemarketthattheFed is acting proactively to prevent the economic cycle from ending.IftheedturnsmoreproactvelydovshalonsdeannterventontoweakenUSD,we couldseeaconsderablemovenUSD.Thelarestmoverswouldlkelybeaanstthe G3USDJYandEURUSD)andnrsk-andrate-senstvecurren