Recently some have proposed the creation of “target zones” for major currencies, presumably in order to create, in part, greater stability in global financial markets. I think that these proposals are unlikely to work.
First, those who can rebalance between short and long assets now prefer holding short term assets because, risk adjusted, these are a better deal. Thus as the central bank increases bond purchases under quantitative easing, the willingness of commercial banks to hold unremunerated reserves rather than long term assets increases.