London: A truce appears to have emerged in the undeclared global "currency war", but analysts question whether central banks have really given up manipulating exchange rates to prop up their economies.
"The currency war is in reality a war between central banks who are battling to support their own interests and taken into account what their rival central banks are doing," said Sylvain Loganadin, an analyst at online foreign exchange broker FXCM.
Meanwhile analysts at HSBC bank said they believe "a truce has broken out in the global currency war".
"Exhausted by the battle, it seems the ECB has given up the fight to continually engineer higher inflation through a weaker exchange rate. The Bank of Japan has also come to realise the limits of currency war following the failure of a shift to negative rates to foster (yen) weakness."
The European Central Bank seems to have thrown in the sponge at its March 10 monetary policy meeting.
With global financial markets roiled by volatility in the first two months of the year, the ECB seemed to give up targeting a lower level for the euro, instead announcing new measures to ease access to credit in order to support recovery of the eurozone economy.
"Central banks innovate and adjust narrative," noted economists at Barclays bank.
The ECB turned its "emphasis to credit easing and stimulating domestic demand away" from an implicit strategy to weaken the euro while in a speech this past week US Federal Reserve chief Janet Yellen "also surprised markets, albeit in a different way."
Instead of emphasising the strength of the recovery of the US economy, Yellen highlighted global economic and financial risks, with the dollar falling in value as fewer hikes in interest rates are now likely this year.
Barclays economists went as far as saying that the ECB and Fed moves, following the turbulent start of the year, "could suggest a potential 'implicit accord' between core policymakers" was made at the Group of 20 meeting in Shanghai at the end of February.
For HSBC, the narrow range of the movement of the euro against the dollar means that some market participants now see greater coordination of central bank policy.
But if there is such an accord, "why should it be secret", asked Capital Economics economist Julian Jessop.
"If policymakers genuinely thought that exchange rates had moved dangerously out of line with (economic) fundamentals and that the strength of the dollar was becoming a major problem, why not say so?"
He noted policymakers have talked publicly of other risks to the global economy, and that a verbal intervention might have been enough to bring the dollar down.
Moreover, coordination is complicated by signs that the interests of central banks are not aligned as the BoJ, ECB and Fed each would like to see their currency weaken against its counterparts.
"The aim of devaluing the currency is to boost exports to make up for flagging growth and boost inflation by increasing the price of imports," said market analyst Jasper Lawler at CMC Markets.
And given that influencing the exchange rate is an easy means for central banks to achieve their policy objectives, it will be difficult for policymakers to abstain from using it.
Loganadin noted that result wouldn't be desirable.
"If currencies weren't controlled any longer by central banks, we'd have market movements similar to those with Bitcoin with periods of intense speculation followed by burst bubbles, which would have a dramatic effect on the real economy with alternating periods of hyperinflation and deflation," said Loganadin.
But the prospect for any truce is at the mercy of China, which still controls its currency.
China's central bank "has a tendency to go it alone and adopt surprise measures" that have effects on the United States and Europe, noted Loganadin.
That unpredictability from the world's second largest economy is a source of concern for currency traders.