Foreign Exchange Market Intervention

Abstract

The Reserve Bank’s approach to foreign exchange market intervention has evolved since the float of the Australian dollar in 1983, as the Australian foreign exchange market has developed and market participants have become better equipped to manage their foreign exchange risk. Over time, foreign exchange market intervention has become much less frequent and more targeted towards addressing periods of market dysfunction. This article presents a new dataset and summarises the key characteristics of major intervention episodes since the late 1980s. Some simple regression analysis is undertaken to gauge the effectiveness of these interventions, but the results mainly illustrate the inherent limitations of such exercises.

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