Central bank intervention

Central bank intervention

The buying or selling of currency, foreign or domestic, by central banks in order to influence market conditions or exchange rate movements.

Central Bank Intervention

The practice in which a central bank buys and sells one or more currencies in order to affect the exchange rate of its own currency. To give a very simple example, if a central bank believes its own currency is overvalued it may sell that currency on the open market to increase supply. The extra supply will likely drive down the exchange rate to a lower level.
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Lenders with particularly low capital ratios or weak asset quality could face central bank intervention, potentially leading to further bank closures or resolutions.
A third reason for central bank intervention was to signal a commitment to preferred monetary policies.
Central banks control banks through settlements because that's exactly where central bank intervention takes place.
It appears that the old days of central bank intervention to maintain an overvalued exchange rate are over.
KARACHI -- The US dollar is set to become weaker in the open market as expectations of a central bank intervention became more likely, suggested currency dealers on Saturday.
The central bank had to rescue the two banks in a span of about a month after both reported financial woes that needed central bank intervention.
The rest -- bank bailouts, recession, central bank intervention -- is history.
Banks' resort to the BCT for the purchase of foreign currency naturally leads to the destruction of central bank money, the effect of which is counteracted by central bank intervention on the money market to regulate bank liquidity.
While the positive case for European Central Bank intervention is weak at best, it seems that the negative repercussions are becoming overwhelming.
Inevitably any increase in central bank intervention - whether that comes from the BoE, the ECB or the US Federal Reserve continuing to delay a rate rise - implies that a "lower for longer" interest-rate environment is likely to be the message.
Asian markets were vulnerable and open to losses with previous gains surrendered after the harsh combination of fading expectations over central bank intervention and an appreciating Yen encouraged investors to scatter from riskier assets.
This outcome in the absence of central bank intervention leads lenders to expect that lending to individual banks will be unprofitable and explains why banks that would be solvent under normal economic conditions cannot obtain credit from the market in the liquidity-crisis stage.

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