But French officials show no signs of letting that get in the way of their push for a more activist foreign-exchange policy.
It seems the Ministry of Finance has ceded foreign exchange rate policy back to the Central Bank where it belongs. the bank has, for now, won the policy argument that further weakening of the real will be inflationary and lead to a stronger real exchange rate, says Tony Volpon, managing director at Nomura Securities in New York.
In part because of the advent of all this unconventional monetary policy, foreign-exchange markets have been changing the way they think and operate.
FXL, a combination of a foreign-exchange hedge with an insurance policy.
Indeed, studies have shown that even when emerging-market economies say they are floating (as Malaysia, for example, used to), they tend to rely more heavily than the industrial countries do on interest-rate policy and foreign-exchange market intervention to limit actual movements in the exchange rate.
Some people say the Bush Administration should abandon its "hands off" policy and intervene in foreign exchange markets to push the dollar down further, by around 10% to 20%.
Most of the risk in Brazil stems from political interference in the economy through a myriad of surprise macro measures such as taxation on investment, to monetary policy related to the foreign exchange rate.
The Tuesday tariff is yet another measure aimed at protecting local industry following sector-specific tax incentives (like the auto industry) and a more aggressive intervention policy to maintain the foreign exchange rate between the U.S. dollar and the Brazilian real at weak levels.
In an effort to obtain loans to service its debt, Seychelles in November 2008 signed a standby arrangement with the IMF that mandated floating the exchange rate, removing foreign exchange controls, cutting government spending, and tightening monetary policy.
As the dollar weakens in foreign exchange markets and perhaps as other central banks decide also to adopt a more accommodative policy, that could be a boost forth U.S. economy.
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The obvious policy response is intervention to cap the sterling rate, build up foreign-exchange reserves, and offset the monetary effects by issuing sterling debt.
Either way, the push to make policy changes "adds uncertainty to the environment, " said Perry Kojodjojo, a foreign-exchange strategist at HSBC in Hong Kong.
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