GIVEN that the maintenance of clean, fair and orderly markets is a prime objective of the Financial Services Authority and regulators in many other countries, it is a pity their writ cannot be made to run to include the behaviour of central banks and the way they seek to manipulate international currency trades - something that would count as market abuse if tried by an individual in the equity markets.

It is well known that the dollar is on the slide and that most Asian nations are intervening in the markets, so that their currencies do not get revalued against the greenback, leaving the euro and sterling to bear the brunt of the adjustment.

But figures just released by Japan show that the scale of the intervention - or attempted manipulation - is far bigger than most of us suspected.

The Japanese spent 20 trillion yen (about £100 billion) in 2003, more than two-and-a-half times the recent high of 7.6 trillion yen recorded in

1999.

But if that is an astonishing figure, it pales in comparison with the amount the Japanese have set aside for possible currency intervention this year. That figure is reported to be 100 trillion yen (£500 billion) - more than the entire tax revenue of the UK in one year and more than the projected US trade deficit for this year, which is a major cause of the dollar's weakness in the first place.

The daunting size of the Japanese provision suggests two things, neither of which is comfortable. First, the view from Tokyo seems to be that there is a major risk of a severe dollar crisis. Second, if that happens neither the Japanese yen nor the Japanese economy is going to bear the brunt of the market.

Meanwhile, as you watch the daily gyrations of the dollar, remember that thanks to the activities of our central banks - and the absence of regulators - that the foreign exchange markets, though vast, could not possibly be described as clean and fair.

When standards have improved so much in so many of the world's jurisdictions, why, I wonder, do we continue to view such blatant attempts at market manipulation as acceptable when in any other financial market they would be considered beyond the pale?

Rate rethink

THE Bank of England's monetary policy committee met yesterday and this morning to discuss interest rates. It's never an easy task, but the fact they were meeting this close to the New Year makes their job almost impossible.

They cannot take a sensible view of the economy without knowing the figures for Christmas retailing, which are not yet fully available, while the news from elsewhere has been mixed.

Some items, such as the surge in British Airways cargo traffic and premium passengers, offer an upbeat indication of recovering world trade.

Other factors, such as the slide of the dollar against sterling and the euro, have the potential to add significantly to uncertainty and cause serious difficulties. So before the committee even met this week, most economists said the chances of an interest rate change today were virtually zero.

Attention is really focused on next month because that is when the Bank's quarterly Inflation Report is due and it will have to grapple for the first time with the switch in target from 2.5%, measured against the Retail Prices Index, to 2% against the new Consumer Prices Index - which consistently gives a lower reading as it excludes house prices.

Although in theory the change should make no difference, in practice it may lead to a loosening of policy in that the inflation rate measured this way is currently well below its target.

It would be interesting to hear a discussion on whether, with inflation so low, the target is still meaningful. Perhaps the MPC should seek a remit to target asset prices, such as housing, instead.

There is also a bigger issue which needs to be thrashed out.

Chancellor Gordon Brown's forecast for next year and the year after is for growth between 3% and 3.5%. But, judging by the way it raised interest rates in November, the Bank seems still to be working on the principle that the fastest the UK economy can grow without igniting inflation is somewhere around 2.75%.

Only if there is the massive surge in exports at the expense of consumer spending - which the Treasury seems to predict - can the two potentially be reconciled.

But how likely is that with sterling going through the roof and the eurozone deflated by the strength of its currency?

Meanwhile, is it safe to have the two pilots trying to fly the economy at different speeds?

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