Last week's surprise intervention by the United States and four other nations in the foreign exchange markets, designed to halt the spectacular rise in the international value of the dollar, revived an old and bitter debate:

Is there really anything that governments can--or should--do to change the fluctuating levels of one currency against another?

From the first day that the Reagan administration took office, it made good on its well-known hands-off ideology: it would no longer follow the Carter administration pattern of being ready to jump into the markets to prop up or hold back the dollar.

Europeans, who had argued that America was following a policy of "benign neglect" when the dollar plunged in value in 1978 and 1979, felt equally aggrieved when the dollar in 1981 began to soar to new highs, even though their exports to the United States should have been greatly stimulated by cheaper marks, francs, and so on. ("We haven't been able to capitalize on the situation because the Japanese still have an advantage," is the lame excuse of a European Community official.)

Not only did the high interest rates--the main cause of the dollar's strength--attract investments from Europe, but also, to slow down that process, European governments were forced to raise their own interest rates, deepening an already severe recession.

American businessmen also protest that the dollar is seriously "overvalued," resulting in a widening of the U.S. trade deficit, and negating their efforts--vis-a -vis the Japanese--to produce better quality goods at a competitive price.

There can be little doubt that the extraordinarily high level of the dollar is contributing to and fomenting a virulent degree of protectionism. Many whose instincts run to the "free trade" side have nevertheless looked for palatable means of reining the dollar in, considering that the lesser of economic evils, when measured against the devastating effects of quotas, high tariffs, and other restrictions on trade.

Yet, there is an unresolved question as to whether the dollar is 20 to 30 percent "overvalued," as experts such as former assistant secretary of the Treasury C. Fred Bergsten insist--or whether (unfortunate as it may be) the high level of the dollar reflects conditions in the world as they really are.

In that case, the only way in which the dollar is going to change is if the basic conditions change.

The further rise of the dollar this year, in the face of record American budget, trade and current account deficits, is really a remarkable story. From January through last week, according to the Morgan Guaranty Trust Co., the dollar has risen another 12.2 percent against the German mark, 19 percent against the French franc, and 5 percent against the yen.

This is in addition to the huge appreciation of the dollar in 1981 and 1982. Since Francois Mitterrand took over the presidency of France, the franc has lost about 50 percent of its value against the dollar, which is great for American tourists in Paris, but a devastating revelation of the lack of confidence--in Europe and elsewhere--in the French economy.

Against the 15 other major currencies of the world--and allowing for differences in inflation rates--the dollar appreciated in value by 11 percent in 1981, another 8 percent in 1982, and yet another 2.7 percent from January through Aug. 3--a total of almost 22 percent in the past 30 months.

There is no mystery at all about it. And all the reasons for the dollar's strength suggest that the pattern will continue, and that intervention can have only small impact, if any.

Interest rates in the United States are high, and may go higher. Yet, inflation rates have come down dramatically, productivity is increasing, and despite huge job losses to backward industries such as steel, autos, and the other "smokestack" concerns, the service and high-tech industries promise a reasonable economic growth rate for the next few years.

Thus, investments are attracted to the United States from all over the world, especially when the broad American continent, protected by two large oceans, seems a "safe haven," given increased political and economic tensions elsewhere.

As J. Paul Horne, a brokerage house economist, told the Wall Street Journal's John Leger in Brussels:

"If I'm an institutional investor in Kuwait, and I see 20-year U.S. bonds at 12.05 percent, and I've got confidence in the administration and Federal Reserve Chairman Paul A. Volcker, I'd have to have my head examined if I went out and bought German mark bonds yielding 8 1/4 percent."

Europe may be enmeshed in deep unemployment for many years, with little opportunity for substantial capital investment that will increase its efficiency. The German "economic miracle" seems a thing of the past. And the new austerity that has been enforced on France, Germany's largest trading partner, is likely to be an additional burden for the Germany economy.

Some analysts believe that, in one sense, the coordinated intervention last week was as much a response to fears of a "free fall" in the West German mark as to concern about the American dollar.

So, as Morgan Guaranty's chief economist Rimmer de Vries says, the markets had better get used to a strong dollar for a long time. So long as the budget deficit continues at or near the $200 billion level, it is clear, interest rates will stay high. And so long as interest rates stay high, and the United States is free of the kind of political and strategic worries that plague Europe, the dollar is likely to stay high.

Does that mean there is no role for intervention? Bergsten, who helped manage an active intervention policy in the Carter administration, believes that speculative fever can be cooled if traders know that governments can come in and swiftly put a damper on things. He doesn't advocate a massive intervention arrangement, believing it is more important that speculators are kept off balance because governments might come in at any time.

Even if this past week's intervention has been modest, de Vries points out, it calmed the markets, and at least temporarily "stalled" the rise of the dollar.

Fed Chairman Volcker has long advocated a willingness to accept a modest intervention policy, when it is directed at controlling extreme fluctuations in the value of the dollar. Markets, he believes, can "overshoot" or "undershoot" real values, and in those circumstances, he believes there is a place for joint action by major nations.

On the other hand, former German central bank president Otmar Emminger used to say that "on certain occasions, overshooting is necessary to get policies adjusted."

In effect, the Reagan administration reluctantly decided last week it needed to calm the jitters in Europe, responding to the Williamsburg summit commitment to cooperate more fully in this area. It may also, as Bergsten suggests, have shown political sensitivity to the charge that "they have presided over the de-industrialization of the economy through the loss of price competitiveness." Bergsten estimates that the huge trade deficit will cost 2 million to 3 million jobs.

In summary, the dramatic rise of the dollar and attendant U.S. trade deficits have been and are negative factors for the U.S. economy, because it makes our exports less competitive.

Small interventions now and then should never have been discarded as an option to smooth out erratic behavior, and one can hope that the Reagan administration will now, from time to time, go back into the markets to do just that.

But a more important priority should be reduction of the huge budget deficits that the Reagan administration has helped create, so that interest rates can come down.

The second priority should be to give some real meaning to that "convergence" pledge at Williamsburg, especially in terms of American-Japanese fiscal policies--ours should tighten up, theirs should loosen up. That will help both the United States and Japan to get a more sensible dollar-yen exchange rate. It will do little for the malaise in Europe, which may be in a hopeless, long-term decline.