FX intervention is no substitute for hikes, Commerzbank warns

Whether intervening verbally or actively buying and selling, central banks will only succeed in buttressing their currencies for the long term with interest rate hikes, Commerzbank AG warns. 
Commerzbank says only aggressive interest-rate hikes will salvage the krona. Not only are the Riksbank’s threats of intervention unproductive, but the central bank doesn’t appear to have the firepower to step in anyway, Commerzbank points out. | Photo: Riksbank
Commerzbank says only aggressive interest-rate hikes will salvage the krona. Not only are the Riksbank’s threats of intervention unproductive, but the central bank doesn’t appear to have the firepower to step in anyway, Commerzbank points out. | Photo: Riksbank
By Alice Atkins / Bloomberg

Switzerland, Sweden and Japan are among the countries where policymakers favor interventions, rather than matching the aggressive monetary tightening of other central banks, Commerzbank AG strategists led by Ulrich Leuchtmann wrote in a note. Those nations are breaking with decades of accepted practice and exposing themselves to significant risks, they said.

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