Foreign‐Exchange Trading Volume and Federal Reserve Intervention

We find a large positive correlation between daily trading volume in currency futures markets and foreign‐exchange intervention by the Federal Reserve over the period 1979 to 1996. Neither contemporaneous nor predicted volatility can fully account for the increases in trading activity. Whether or not the intervention operation is publicly reported appears to be an important determinant of trading volume. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:851?860, 2001