The central banks of the Group of Seven nations undertook a big risk when they began to heavily support the dollar by intervening in the world's foreign exchange market on Jan. 4. Their attempt to turn the direction of the dollar was immensely successful. As the central banks bought billions of dollars and sold other currencies, and as foreign exchange dealers scurried to cover their short positions, the dollar rose from 121 yen on Jan. 4 to as high as 129 on Jan. 7.

The risk is that if the downward drift of the dollar continues, the central banks, which have bought billions of dollars, will suffer sizable financial losses.

The risk was taken for several reasons. The falling dollar has caused the currencies of many of our trading partners to appreciate, which has made their exports more expensive, has seriously curtailed their export trade and has led to a slowdown in their economies.

From a political standpoint, the continued cheapening of the dollar is a disgrace for the United States. With an election year before us, we simply couldn't continue to give away the country to nations loaded with cheap dollars.

Finally, the G-7 nations were hoping that they could stabilize exchange rates long enough to allow the nasty trade deficit to contract. In effect, they were buying time.

So after two weeks of intervention, now what? The problem is that the large trade and current account deficits are not going to be turned around anytime soon, and at best, progress will be slow. That means that an estimated $125 billion to $150 billion current account deficit has to be financed this year, and the deluge of dollars will continue to flood the foreign exchange market, forcing the dollar lower.

I often feel that the politicians do not realize the potential disaster that awaits us. Aside from the loss of prestige and our slippage as a world power, we overlook the change in our standard of living that will follow.

In relative terms, that change is already occurring. A visit to Europe or Japan will underscore how much more expensive everything is abroad.

But the affect that lies ahead is absolute, rather than relative. International economists state that this change will come in two forms. First, we will lose wealth; our exports will be worth less in terms of physical goods imported as the dollar declines and as import prices change versus export prices. For example, if import prices rise 10 percent and our export prices increase 5 percent over a year, the United States has lost 5 percent in terms of the purchasing power of our exports. We have already lost a little, but more will probably occur.

An economic downturn will prove very difficult for the federal government, since it will face rapidly expanding fiscal deficits. These larger deficits will be caused by an increase in transfer payments (unemployment), by less tax revenue as incomes are reduced, and by increasing interest funding costs on the federal debt.

The end result will be high real interest rates (nominal interest rate minus the inflation rate), which will persist during the downturn and will have a greater depressing effect on the economy than would ordinarily occur.

For our trade deficit to improve, our economy will have to underperform the economies of our trading partners. This means that for a given improvement in our trade deficit, our economy will have to undergo a deeper recession than the economies of our trading partners.

Regardless of what the administration might think or say, these are high risk times. Prudential-Bache's international economist, Charles R.Taylor, thinks there is a serious risk of a dollar crisis during the first six months of 1988. Now is the time for bond investors to be quality conscious and defensive, and not take on any undue market risks.

James E. Lebherz has 29 years' experience in fixed-income investments.