RISING TO THE CHALLENGE
Central bankers and finance ministers have emerged from their free market bunkers during the past 18 months to fight forex dealers and speculators with all the weapons they can muster. And despite emerging doubts about the viability of joint action to manage exchange rates, there will not be a return to the old order.
Forex advisory services have reacted to these developments with a mixture of satisfaction, scepticism and, in some cases, disinterest. But the analysts who make their living by advising clients about buying, selling and hedging currencies are unanimous in their belief that it is still difficult to forecast exchange rates and insist that they have a valuable role to play. The convergence of economic policies, the move to coordinated forex market intervention and the prospect of target zones for exchange rates are helpful elements in the forecasting equation, but getting the answer right remains a major challenge.
Many forecasters believe that recent events, such as the two meetings of the Group of Five (G5) countries -- the USA, Japan, West Germany, the UK and France -- in January and September 1985, which resulted in agreement on coordinated intervention to bring the dollar down, have made their task more difficult.