Federal Reserve Slowed Dollar Purchases in May-July Period
The purchases were only a fifth as large as in the previous three-month period, when the Federal Reserve and Treasury Department bought more than $4 billion to support a sharply sliding dollar.
The Federal Reserve Bank of New York is in charge of buying or selling dollars on behalf of the Federal Reserve and the Treasury Department in order to influence the exchange rate of the U.S. currency.
The dollar has gone into another sharp decline since mid-August, and the New York Fed has presumably intervened again to support it, but the bank keeps its actions secret until well after the fact.
Although currency traders would be more interested in knowing the New York Fed's current or anticipated actions, its behavior in the past can also provide clues to policy on exchange rates.
The New York Fed said it bought dollars on three occasions when the dollar showed weakness, compared to 17 times in the February-April period.
Less intervention was necessary in May, June and July. In fact, the dollar rose about 6.5 percent against the Japanese yen and about 4 percent against the West German mark and other European currencies.
The United States bought dollars to uphold its part of agreements reached with other industrial nations earlier in the year in Paris and Venice, Italy, that further declines in the value of the dollar would be ``counterproductive'' for trade.
``This is not to suggest that we have a magic level that we're aiming at with every particular currency,'' said Sam Y. Cross, executive vice president in charge of the foreign group at the New York Fed, who released the report Thursday. …