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The Federal Reserve as an informed foreign-exchange trader

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  • Owen F. Humpage

Abstract

U.S. exchange-market intervention has no apparent effect on market fundamentals but may influence expectations. If intervention can accurately forecast exchange-rate movements, knowledge that the Federal Reserve is trading can alter traders' prior estimates of the distribution of exchange-rate changes. This paper finds that U.S. intervention has value only as a forecast that recent exchange-rate movements will moderate but not that they will reverse.

Suggested Citation

  • Owen F. Humpage, 1998. "The Federal Reserve as an informed foreign-exchange trader," Working Papers (Old Series) 9815, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwp:9815
    DOI: 10.26509/frbc-wp-199815
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    References listed on IDEAS

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    Cited by:

    1. Michael D. Bordo & Owen F. Humpage & Anna J. Schwartz, 2015. "Epilogue: Foreign-Exchange-Market Operations in the Twenty-First Century," NBER Chapters, in: Strained Relations: US Foreign-Exchange Operations and Monetary Policy in the Twentieth Century, pages 345-363, National Bureau of Economic Research, Inc.
    2. Aurélie Boubel & Richard Topol, 1999. "Intraday Exchange Rate Dynamics and Monetary Policy," Documents de recherche 99-20, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.

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    Foreign exchange - Law and legislation;

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