US foreign exchange market intervention since 1962

The Federal Reserve has intervened in foreign exchange markets since 1962 as a partner of the Treasury's Exchange Stabilization Fund. Departing from its scripted passive role under the Bretton Woods system, the US defense of the dollar under pegged exchange rates may not appear unreasonable. Why the practice continues under a floating rate system is harder to understand. By accumulating large foreign currency balances since 1987, the US has made intervention easier. Holding larger balances does not help the authorities know what exchange rates ought to be. The US for a few rears in the 1980s refrained from intervening. It can happen again if its authorities acknowledge that intervening is an exercise in futility.