Central bank intervention

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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
Central Bank interventions stabilized around 11.5 billion dinars, and took the form, mainly, of main refinancing operations (7 billion dinars) also called tenders, foreign exchange swap operations for monetary policy purposes ($ 2.8 billion) and firm purchases of treasury bills ($ 1.2 billion).
Furthermore, the paper adds to the limited number of studies that have examined the potential asymmetric effects of central bank interventions in the foreign exchange market by looking at the impact of purchases and sales of foreign exchange separately.
Summary: The GEL partly gained its value against the US$ without central bank interventions.
The Euro/Dollar swung erratically on Thursday following Mario's Draghi's dovish remarks on Eurozone growth that left investors pondering the likelihood of further central bank interventions in the future.
In 2015, "like the last seven years, it is the central bank interventions which will have an influence over the markets," said Romain Boscher, a stock portfolio manager at Amundi.
As the IMF (2009, 37) points out, "A member should intervene in the exchange market if necessary to counter disorderly conditions, which may be characterized inter alia by disruptive short-term movements in the exchange rate of its currency." Moreover, most central bank interventions are conducted silently, even though a minority of industrialized countries provides intervention data ex post.
The European trade union movement finds that this treaty - which aims to ensure conditions favourable to continuing European Central Bank interventions and greater German financial solidarity - will impose further budget austerity in Europe and hinder job creation.
The technicalities of Asian Central Bank interventions aside, the underlying story is that these banks and oil rich countries are losing their appetite for the US dollar; if they didn't, they'd keep their dollars and not recycle them.
However, central bank interventions will maintain the stability.
The currency held stable in the past two months at around 215 to the greenback, aided by Central Bank interventions.
"These short central bank interventions serve only to assure that in a crisis situation the system of liquidity provision functions in an orderly manner," he told the newspaper.
dollar, coordinated central bank interventions in the foreign exchange market, and offered provisions for identifying "currency manipulators." The familiar legal props for international economic coordination of the 1980s and 1990s are repealed.

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