Central banks can only slow, not stop, currencies from moving when fundamentals dictate a shift. That means you, Malaysia and Thailand.
Analysts at Deutsche Bank have just published a study of the effectiveness of central-bank intervention in currency markets, and it's not a pretty picture. Interventions do seem to work when currencies just need to be brought back in line with fundamentals. But when central bankers are pushing against economic reality, well, eventually reality seems to win out.
How can you trade on this? Look for countries where central banks seem to be fixated on sticking to a certain rate, and intervention has been large and one-sided. The poster children right now for this kind of stubborn intervention are Malaysia and Thailand, the analysts said. Both countries are facing capital inflows, Malaysia has a current account surplus that is 12.2% of GDP - and the central banks seem to be trying to keep exchange rates constant, Deutsche Bank said.
"We are inclined to think that these support levels in USD/MYR and USD/THB are likely to break in coming weeks," the analysts wrote. "Quite likely, authorities will shift their line in sand to a lower level, reflecting a further accommodation of the underlying macro trend."
Translation: get ready to trade.
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