Читать книгу Foreign Exchange: The Complete Deal - James McDowell. Sharpe - Страница 23

Foreign exchange intervention is often quoted in the news but rarely will you see any working definition. I shall view it as any transaction or announcement by an official agent of a government that is intended to influence an exchange rate. Typically intervention operations are implemented by the monetary authority. Central banks tend to use a narrower definition, which is the sale or purchase of foreign currency against domestic currency in the foreign exchange market.

Intervention is normally transacted directly through the large commercial banks (normally of the country in question) and can be public or secret. It can be enacted through one bank or a number of banks to achieve maximum impact or visibility. Secret interventions are difficult to hide and sometimes may be carried out by the Bank for International Settlements.

The problem central banks face is the market perception that they have set an exchange rate level to protect (commonly referred to as a line in the sand). This invariably tempts the market to test resolve and pockets of the central bank by continuing to buy or sell.

During the period in which countries followed the Bretton Woods ‘exchange rate system’ intervention operations were required whenever rates exceeded their parity bands. After the breakdown of the system in 1973 intervention was left to the discretion of individual countries. It was not until 1977 that the IMF provided its member countries three principles to adhere to in their intervention policy. ^[3] The principles said that countries should:

1 not manipulate exchange rates in order to prevent balance of payments adjustment or to gain unfair competitive advantage over others

2 intervene to counter disorderly market conditions

3 take into account the exchange rate interests of others.

These principles implicitly assume that intervention policy can influence exchange rates.

The US was actively involved in intervention during the 1970s but was absent from 1981 through 1984. However, in early 1985 after the dollar had appreciated by over 40% and the US trade deficit was approaching $100bn, the Federal Reserve (Fed) in the US joined with the German Bundesbank (BUBA) and the Bank of Japan (BoJ) to intervene against the dollar. In the autumn of 1985 the US and the rest of the G-5 (Germany, Japan, France and the UK) engaged in a number of large and coordinated operations as part of the Plaza Agreement. While the scale of central bank intervention was large in the post-1985 period relative to previous history, it was still small in relation to the overall market. The Plaza Agreement stated:

“In view of the present and prospective changes in fundamentals some orderly appreciation of the main non-dollar currencies against the dollar is desirable. The Minister and Governors stand ready to cooperate more closely to encourage this when to do so would be helpful.” ^[4]

During the period 1985-1987 the dollar fell by over 50% against the Deutschmark. Throughout the period the central banks’ stated intention was to affect the level rather than the variability of exchange rates. However, in February 1987 the G-7 produced the Louvre Accord which stated that nominal exchange rates were “broadly consistent with underlying economic fundamentals” and should be stabilised at their current levels. ^[5]