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Foreign Exchange: The Complete Deal by James Sharpe

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2. Central Banks and Foreign Exchange Intervention

What is foreign exchange intervention?

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 ...

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