The European Central Bank is probably breathing a sigh of relief. Intervention to prop up its sickly charge, the euro, helped to stem the tide of selling on Monday after about 20 months of almost continuous decline.

But foreign exchange rates are notoriously difficult to control, and few believe that one foray into the market will be enough to turn around the currency's fortunes.

A number of factors suggest that further intervention by the world's leading central banks could be necessary in future.

Firstly, there is the sheer size of the job in hand. About $1,500bn is traded in the foreign exchange markets every day, the majority of which is speculative flows.

Traders estimate that the ECB, along with the Bank of Japan, the Bank of England and the US Federal Reserve spent no more than $10bn buying euros on Friday, a drop in the ocean compared with the overall size of the market.

Needing dollars

In order to turn around the euro trend - at one point the single currency had lost almost 30% of its value against the dollar since its launch in January 1999 - policy makers will need to influence longer term investment flows, not just short term, or "hot money" flows.

One reason why the single currency has been losing value is that European investors and companies have been buying US assets, eager to cash in on the economy's unprecedented nine-year expansion.

Tempting them to keep their money in Europe - and therefore euros - will require major economic reforms, and that could take years.

A more immediate concern is the outcome of the Danish referendum on euro membership, due on Thursday.

A "no" vote could shake confidence in the single currency even further, although traders agreed it would stop short of threatening the project's survival.

Precedent

However, there are some bright spots on the horizon. The fact that the ECB has intervened once means it could do again.

It has about 50bn euros in reserves and the mere threat that it could use that money to buy more euros may be enough to stop investors from selling the currency.

There are also tentative signs that the strong dollar is beginning to hurt American companies, a factor which could dent the US currency's appeal.

A number of large corporates - including MacDonalds and IBM - have complained that the strength of the US currency is harming exports and therefore profits.

If that trend continues, not only will investors be less inclined to put their money into US companies - therefore reducing the demand for dollars - but American policy makers will also be more likely to sanction further intervention to boost the euro.

However, at present, that remains a longer term scenario.

Over-reaction?

Finally, those hoping the ECB's recent round of intervention will help to prop up the euro could take some comfort from history.

Of course, intervention is by no means always successful. If it is going against the direction of fundamentals and therefore against the might of the market, it is almost certainly going to fail.

The pound's ignominious exit from the European Exchange Rate Mechanism in September 1992 is one painful example.

However, there are other times when intervention has proved almost too successful.

In 1985, major central banks intervened to reduce the value of the dollar - an agreement that became known as the Plaza Accord.

It was so effective that two years later, in 1987, a further agreement was needed to stabilise the dollar's value after it had fallen by about 40%.