The United States as an informed foreign-exchange speculator |
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Authors: | Owen F. Humpage |
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Affiliation: | 1. Institute for Financial Management Research, 24, Kothari Road, Nungambakkam, Chennai 600034, India;2. Centre for Advanced Financial Studies, Institute for Financial Management and Research, 24, Kothari Road, Nungambakkam, Chennai 600034, India |
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Abstract: | US exchange-market interventions have no direct effect on market fundamentals, but they may influence expectations. If intervention has value as a forecast of exchange-rate movements, knowledge that the United States is trading will cause dealers to alter their prior estimates of the distribution of exchange-rate changes. This paper finds that US intervention has had value only as a forecast that recent exchange-rate movements would moderate. Less than half of the interventions, however, seemed successful, and the favorable results were generally confined to two short periods that were characterized by uncertainty about future Federal Reserve policies. |
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Keywords: | Intervention Foreign exchange-rates Federal Reserve System Exchange Stabilization Fund US Treasury |
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