Working Paper

The Federal Reserve as an informed foreign-exchange trader

Abstract: U.S. exchange-market intervention has no apparent effect on market fundamentals but may influence expectations. If intervention can accurately forecast exchange-rate movements, knowledge that the Federal Reserve is trading can alter traders' prior estimates of the distribution of exchange-rate changes. This paper finds that U.S. intervention has value only as a forecast that recent exchange-rate movements will moderate but not that they will reverse.

Keywords: Foreign exchange - Law and legislation;

https://doi.org/10.26509/frbc-wp-199815

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 1998

Number: 9815