Today in many countries of the worldthe policy of a managed exchange rate of the national currency, for which the state Central Banks are carrying out so-called currency interventions optimized for a certain value of the domestic currency. After releasing the rate of national currency in free navigation, you can get problems in the economy. What is the currency intervention of the Central Bank, and how it is conducted - this should be understood in more detail.
Currency intervention is called a one-timea transaction for the purchase or sale of foreign currency, in the Russian Federation carried out by the Bank of Russia. At the same time, the volumes of currency interventions are usually quite large. Their goal is to regulate the exchange rate of the national currency in the interests of the state. Basically, such actions are implemented with a view to strengthening the national currency, but sometimes they can be aimed at weakening it.
Such operations are capable to a great extentinfluence both the foreign exchange market as a whole and the exchange rate of a certain monetary unit. Currency interventions are initiated by the Central Bank of the country and, basically, they are the main method of currency policy. In addition, the regulation of currency relations, especially when it comes to third world countries, occurs in conjunction with other IMF participants. To participate in such events, banks and treasuries are involved, and manipulations are carried out not only with currencies, but also with precious metals, in particular gold. Currency intervention of the Central Bank is carried out exclusively by prior arrangement and is carried out at specific, pre-agreed times.
In fact, the mechanism of course regulationthe national currency is very simple, and it was built on the basis of the principle of "supply and demand." If it is necessary to increase the value of domestic money, the Central Bank of the country begins to actively sell foreign currency (mostly dollar), while any other convertible currency can be used. Thus, the intervention of the Central Bank leads to an overabundance (increased supply) of foreign currency in the financial market. Simultaneously, the Central Bank buys the national currency, which generates additional demand for it, why the rate can grow even faster.
In the opposite way, a currencythe intervention of the Central Bank, aimed at weakening the rate of the national currency, which is actively selling, not allowing it to grow in value. The purchase of foreign banknotes leads to their artificial shortage in the domestic market.
It is noteworthy that not always an interventionCentral Bank means buying and selling a large amount of currency, from time to time a fictitious procedure can be conducted, sometimes it is called verbal. In such cases, the Central Bank launches a rumor or "duck", so that the situation in the foreign exchange market can change significantly. Sometimes fictitious intervention is used to enhance the effect of real currency intervention. Also very often, several banks can pool their efforts to achieve the desired result.
Practice shows that verbal interventionis used by the Central Banks much more often than the real one. A big role in such cases is played by the surprise factor. In any case, the intervention of the Central Bank, aimed at strengthening the existing trend in the foreign exchange market, is usually more successful than manipulation, whose purpose is to reverse it.
A lot of cases of manipulation on thecurrency market. For example, in 2011, due to the difficulties in the economies of the United States and the European Union, Japan had to adjust the exchange rate of the national currency, and the country's authorities were forced to reduce it. Japan's finance minister said that speculation in the foreign exchange market caused the overvaluation of the yen's exchange rate against foreign currency signs and this state of affairs does not correspond to the state of the country's economy. Subsequently, it was decided to adjust the rate of the yen in conjunction with the Central Bank of the West, for which Japan has made several major transactions for the purchase of foreign currency. The introduction of trillions of yen to the foreign exchange market helped to reduce its rate by 2% and balance the economy.
A vivid example of the use of financial levers inRussia can be observed since 1995. Until then, the Central Bank had sold foreign currency to regulate the ruble, and in July 1995, the principle of the currency corridor was introduced, according to which the value of the national currency should be maintained within the established limits and for a certain period of time. However, changes in the world economy by 2008 made this model of monetary policy ineffective, after which a bi-currency corridor was introduced. In this case, the ruble was regulated on the basis of its relation to the dollar and the euro. One way or another, the Central Bank carries out currency interventions by following this monetary policy.
The events of 2014-2015 affected thethe fruitfulness of the currency interventions conducted by the Central Bank of Russia, so his recent manipulations did not yield the desired result. The fall in oil prices, the associated reduction in the Central Bank's reserves and the budget mismatch ultimately make currency interventions irrational and meaningless.
Today, Russia is heavily dependent onexport of hydrocarbons, which hampers the growth of the national currency. Therefore, such financial leverage as the intervention of the Central Bank, through which the dollar and euro are systematically pouring into the market, is simply necessary for the country's economy. However, in light of the recent events, when the Central Bank's interventions ceased to help control the cost of the national currency, starting from November 10, 2014, the transition to the floating ruble exchange rate was implemented. Now, currency interventions are conducted only in exceptional cases.
Perhaps, this article provides an exhaustive answer to the question of what is the currency intervention of the Central Bank, so it will be unnecessary to go into the details of the financial instruments more thoroughly.
