Long-term factors affect forextradingtimeg forex trading session times rates are basically some fundamental factors, while short-term factors are many, including economic data, economic news forextrading cashback forex central bank intervention in the market which economic data can sometimes change the fundamental factors, because the data itself is a reflection of the fundamentals and with the growing volume of transactions in the exchange market, central bank intervention has become more frequent, and the means are There is now much evidence that monetary authorities often use hedging interventions, but they do so with only partial success, so that foreign exchange market interventions often have spillover effects on the money market Thus, it appears that foreign exchange market interventions may be effective in reducing volatility in the foreign exchange market Foreign exchange market interventions are not fully hedged by monetary authorities movements, respectively, with the DM/USD and JPY/USD exchange rates, we find that in Germany, there is a clear inverse relationship between the dollar exchange rate and changes in the German base currency, especially from the 1970s to the mid-1980s from the mid-1980s onwards, this inverse relationship is not obvious The explanation for this phenomenon is that when the value of the dollar declined during the 1970s, the European and Japanese Monetary authorities have been intervening in order to slow down the depreciation of the dollar These interventions increased the base currency of these countries In the early 1980s, when the dollar appreciated, the opposite occurred As noted earlier, this phenomenon was more pronounced in Germany in the 1970-1973 and 1977-1979 During the 1970-1973 and 1977-1979 periods, the rapid depreciation of the dollar against the mark resulted in a rapid expansion of the German money supply as well. One important result of the previous phenomenon, which has been relatively successful, is that interest rates in the major industrialized countries have been correlated Looking at the yields on government bonds in the United States, Germany and Japan, two facts stand out First, the yields on U.S. government bonds have been on an upward trend from 1960 to 1980 The same phenomenon has been observed in Germany and Japan Second, and more relevant to our analysis, annual interest rate changes in Germany tend to follow the changes in U.S. interest rates in Japan as well, only to a lesser extent. Third, the co-movement of interest rates does not seem to appear to differ significantly during periods of fixed versus floating exchange rates In the case of Japan, for example, the co-movement of interest rates during periods of fixed exchange rates seems to have been less than during periods of floating exchange rates From the preceding practical observations, we can conclude that the monetary authorities of the major countries (Japan and Germany) have often heavily Although they avoid the impact of these interventions on the domestic money market, they have not often succeeded in their seemingly contradictory outcome, as during the floating exchange rate period, the monetary authorities of these countries have been following the "rules of the game", i.e., expanding the domestic currency when there is an excess demand for the domestic currency (excess supply of dollars); when there is an excess supply of the domestic currency; and when there is an excess supply of the domestic currency. However, such interventions in the foreign exchange market are clearly ineffective in stabilizing long-term deviations in the exchange rate Why is it difficult for the monetary authorities to influence larger and longer-term changes in the exchange rate, even though interventions are often accompanied by correct (i.e., stable) monetary policy? In other words, why is it difficult for non-hedging intervention to play a stabilizing role in the exchange rate? The answer is related to the lack of obligations on the part of the monetary authorities themselves to a specific target exchange rate. In other words, the evidence currently available suggests that non-hedging interventions in the foreign exchange market are not sufficient to affect the exchange rate to a large extent. Using an "approximate rationality" model, we can explain this by saying that due to extreme uncertainty, when fundamentals have low weight in predicting future exchange rates, the effect of policies affecting fundamentals is small and economic agents cannot evaluate the importance of these policies for the exchange rate, which will continue to be a backward-looking rule (BACKWARD -This will lead to persistent deviations from the equilibrium exchange rate predicted by the economic model. Such deviations cannot be easily prevented by the monetary authorities, even if they pursue policies that change some important fundamentals, and only an obligation to a particular exchange rate can break this mechanism of deviation Without such a stabilizer, the uncertainty faced by economic agents in forecasting future exchange rates is so great that these agents fall back on the backward-looking rule when forecasting the future If such an obligation is successful in terms of credibility, there is no reason for economic agents to use the backward-looking rule to forecast the future Obligations by the monetary authorities stabilize economic agents The expected result is that the untargeted movements in real exchange rates that have been so typical of major currencies since the 1970s will disappear. The theory of approximate rational behavior also suggests that the distinction between traditional hedging and non-hedging interventions may have only limited practical significance. The reason is that when economic agents do not know the really important model and fundamental variables that cause exchange rate movements, interventions that change the fundamental variables of the economy may be no more effective than interventions that do not change the fundamental variables of the economy In the view of approximate rational expectations, interventions are effective only when there is an obligation to keep the exchange rate close to some target I. The objectives of central bank intervention in the foreign exchange market Since the introduction of the floating exchange rate system Since the introduction of the floating exchange rate system, the central banks of industrial countries have never taken a completely laissez-faire attitude toward the foreign exchange market, on the contrary, these central banks always retain a considerable portion of foreign exchange reserves, the main purpose is to intervene directly in the foreign exchange market in general, the central bank in the foreign exchange market prices appear unusually large, or in the same direction for several days of sharp fluctuations, often directly intervene in the market, through The central bank intervenes in the foreign exchange market for a number of theoretical reasons, most of which are broadly based on three reasons: First, abnormal fluctuations in exchange rates are often inevitably linked to international capital flows, which can lead to unnecessary fluctuations in industrial production and macroeconomic development, so stabilizing the exchange rate can help stabilize National economy and prices now international capital flows across borders not only on a large scale, but also through many channels, subject to very few artificial barriers industrial countries from the late 1970s began to relax financial regulations, further facilitating the flow of international capital in the conditions of the floating exchange rate system, the most direct result of the large-scale flow of international capital is the price fluctuations in the foreign exchange market if a large amount of capital flows to Germany On the other hand, if people expect the exchange rate of a countrys currency to rise, capital will inevitably flow to that country. For example, when a large outflow of capital from a country leads to a decline in the exchange rate of its currency, or when the exchange rate of its currency is expected to fall, leading to capital outflows, the countrys industrial allocation and prices are bound to change in favor of those industries that are linked to foreign trade Any countrys industries from the point of view of foreign trade can be divided into industries that can conduct foreign trade and industries that cannot conduct foreign trade The former, such as manufacturing, produces products that can be exported and imported, while the latter, such as certain services, must be produced and consumed locally. When capital flows out of the currency depreciate, prices in industries capable of foreign trade rise, and if the rate of wage increases in this sector is not synchronized, additional production in this sector becomes profitable and exports increase, but from the point of view of the domestic industrial structure Therefore, industrial countries and central banks do not want to see the exchange rate of their currencies deviate from what they consider to be the equilibrium price for a long period of time, which is one of the reasons why central banks intervene directly in the market when their currencies remain weak or excessively strong. Another important effect on the economy is that large capital outflows can cause the cost of domestic production capital formation to rise, while large capital inflows can cause unnecessary inflationary pressures and affect long-term capital investment The tight monetary policy and expansionary fiscal policy implemented in the United States from the early 1980s led to large capital inflows and a gradual rise in the dollar exchange rate, while the U.S. Federal Reserve Bank (Fed) in Between 1981 and 1982, the foreign exchange market and completely laissez-faire attitude of Western European countries in order to prevent capital outflows, the exchange rate of European currencies continue to fall, forced to often intervene directly in the foreign exchange market, and repeatedly asked the U.S. Federal Reserve to help intervene Second, the central bank directly intervene in the foreign exchange market is for the domestic foreign trade policy needs of a countrys currency in the foreign exchange market prices are lower In many industrial countries, the export problem is already a political issue, which involves many export industries, employment levels, trade protectionist sentiment, voter attitudes toward the government and many other aspects of any - a central bank does not want to see its exports because the exchange rate of its currency is too high and hindered, and does not want to see its foreign trade surplus is due to the exchange rate of its currency Therefore, the central bank intervenes in the foreign exchange market for this purpose, mainly in two ways The central bank will intervene directly in the foreign exchange market in order to protect exports when the national currency continues to be strong For those countries where exports are an important part of the national economy, there is even more reason to do so Before April 1992, the Australian dollar was bullish, and the rise was moderate But, on March 30 Australian dollar against the U.S. dollar when the exchange rate rose to $ 0.77, the Central Bank of Australia immediately in the market to sell Australian dollars to buy U.S. dollars Another example is that Germany is the worlds major manufacturing exporters, after the implementation of the floating exchange rate system in the 1970s, the exchange rate of the mark with the strong German economy on the way up, in order to maintain its export industry in the international competitive position, the German government strongly advocated the implementation of the European monetary system, in order to put Mark and other member states of the European Community currency fixed in a range from the international foreign exchange market development history, the use of devaluation of the national currency to expand exports is many countries in the early often used the policy, it is called beggar-thy-neghborpolicy, in the economic downturn, often caused by the two countries trade war because now non-tariff barriers to trade The name of a wide range of white, this artificial intervention in the foreign exchange market policy has been rarely used, and will obviously cause other countries to blame the third, the central bank intervention in the foreign exchange market is due to curb domestic inflation concerns macroeconomic models prove that in the case of floating exchange rate system, if a countrys currency exchange rate is permanently lower than the equilibrium price, in a certain period of time will stimulate exports, resulting in foreign trade surpluses, and ultimately In addition, in some industrial countries, voters tend to regard the inflationary pressure caused by the devaluation of the national currency as the result of the government authorities poor macroeconomic management. pressure as a symbol of the government authorities macroeconomic mismanagement   Therefore, after the introduction of the floating exchange rate system, many industrial countries have made the exchange rate of their national currencies a closely monitored element when controlling inflation The fluctuations of the British pound since the 1980s clearly illustrate the relationship between currency devaluation and inflation In the 1970s, almost all industrial this countries were Throughout the 1980s, the central banks of the United States and Western European countries made anti-inflation the primary or important goal of monetary policy, with the United States and Germany achieving significant results, while the United Kingdom was less effective. In 1990, after more than 10 years of the top, the UK finally announced after the Prime Minister Meijer to join the European Monetary System, the primary reason is the hope that through the European Monetary System, the exchange rate of the British pound to maintain a higher level, so that the UKs inflation is further controlled but the good times do not last long, in 1992 the European Monetary System crisis, the foreign exchange market The pound, lira, etc., finally led to the official devaluation of the Italian lira also based on anti-inflationary considerations, the British government spent more than 6 billion dollars in the market intervention, the German Central Bank in order to maintain the value of the pound and the lira, also spent more than 12 billion dollars in the foreign exchange market intervention in the pound continued to plunge, the pound in the European monetary system devaluation of the situation is very high, the British announced the withdrawal from the European monetary system and never officially devalued the pound, while announcing that it still wanted to continue to implement anti-inflationary monetary policy II, the means and benefits of central bank intervention in the foreign exchange market on what is central bank intervention in the foreign exchange market, there is a more formal definition of the early 1980s, the dollar against all European countries are rising currency exchange rates, around the industrial countries to intervene in the foreign exchange market, 1982 The Versailles Summit of Industrial Countries in June decided to set up a "Working Group on Foreign Exchange Intervention" composed of official economists to study the issue of foreign exchange market intervention. 1983, the group published the "Working Group Report" (also known as "Jergensen Report"), which is a narrow definition of intervention in the foreign exchange market: "any foreign exchange purchase or sale by the monetary authority in the foreign exchange market to influence the exchange rate of the national currency", which can be done through the use of foreign exchange reserves, central bank allocation, or official borrowing In fact, to truly recognize the essence and effect of central bank intervention in the foreign exchange market, it is also necessary to recognize the impact of this intervention on the countrys money supply and policy. "The so-called intervention without changing the policy refers to the central banks view that the sharp fluctuations in foreign exchange prices or deviations from long-term equilibrium are a short-term phenomenon. In other words, it is generally believed that interest rate changes are the key to exchange rate changes, and the central bank tries to change the exchange rate of its currency without changing the domestic interest rate. Bonds, so that the exchange rate changes and interest rates do not change For example, the foreign exchange market, the exchange rate of the dollar against the yen fell sharply, the Japanese central bank wants to take the policy of supporting the dollar, it can buy dollars in the foreign exchange market to throw the yen due to the large number of dollars bought to throw the yen, the dollar became its reserve currency, and the market flow of yen increased, so that the Japanese money supply rose, while interest rates are on a downward trend in order to offset the foreign exchange buying and selling on domestic interest rates, the Central Bank of Japan can throw bonds in the domestic bond market, so that the flow of yen in the market to reduce the trend of falling interest rates thus offset the need to point out that the worse the mutual substitutability of domestic bonds and international bonds, the more effective the intervention of the Central Bank does not change its policy, otherwise there is no effect Central Bank in the foreign exchange market by inquiring about changes in the exchange rate, making statements etc., affect the exchange rate changes, to achieve the effect of intervention, it is called intervention in the foreign exchange market "signal effect" central bank to do so is to hope that the foreign exchange market can get such a signal: the central banks monetary policy will change, or that the expected exchange rate will change, etc. Generally speaking, the foreign exchange market in the first acceptance of these However, if the central bank often relies on the "signal effect" to intervene in the market, and these signals are not all straight, it will have the effect of "crying wolf" in the market The so-called policy change in foreign exchange market intervention is actually a shift in the central banks monetary policy. Monetary policy is a change, it refers to the central bank directly in the foreign exchange market to buy and sell foreign currency, and listen to the domestic money supply and interest rates towards the force of change in favor of achieving the goal of intervention For example, if the mark in the foreign exchange market constantly depreciating, the German central bank in order to support the exchange rate of the mark, it can throw foreign currency in the market to buy the mark, because the mark circulation reduced, the German money supply fell, interest rates are rising trend, people are willing to keep more in the foreign exchange market. People are willing to keep more marks in the foreign exchange market, so that the exchange rate of the mark rises This kind of intervention is generally very effective, at the cost of the established domestic monetary policy will be affected, is the central bank to see the exchange rate of the national currency deviated from the equilibrium price for a long time before the central bank is willing to take to judge whether the central bank intervention is effective, not to see the number of central bank intervention and the amount of money used from the central bank intervention The history of foreign exchange can at least draw the following two conclusions first, if the foreign exchange market unusually violent fluctuations because of poor information efficiency, unexpected events, artificial speculation and other factors caused by the distortion of the foreign exchange market for these factors is often short-term, then the central root bank intervention will be very effective, or rather, the central banks direct intervention may at least make this short-term distortion end early second, if The exchange rate of a countrys currency is high and low for a long time is determined by the countrys macroeconomic level, interest rates and government monetary policy, then the central banks intervention is ineffective in the long run and the central bank insists on intervening mainly because it may achieve the following two purposes: First, the central banks intervention can moderate the decline or rise of the domestic currency in the foreign exchange market, which can avoid violent fluctuations in the foreign exchange market Secondly, the central bank intervention in the short term often has obvious effects its reason is that the foreign exchange market needs some time to digest this sudden appearance of government intervention which gives the central follow up bank some time to reconsider its monetary policy or foreign exchange policy, so as to make appropriate adjustments III, the central follow up bank intervention in the foreign exchange market historical development from 1973 to the present The central banks of industrial countries often in the foreign exchange market for direct intervention, success and failure of both (1) the summer of 1992 the United States and other central banks on the foreign exchange market intervention in mid-March 1992, the foreign exchange market on the long-awaited U.S. economic recovery again disappointed in Germanys high interest rates and the United States adhere to the influence of loose monetary policy, began to continuously sell the dollar, resulting in the dollar almost to All European currency exchange rate all the way down the U.S. and European central banks respectively in July 20 and August 11, two large-scale intervention in the foreign exchange market these two interventions by nature, are not to change their respective economic policies of intervention, although there is a short-term effect, in the medium and long term is a complete failure of the first intervention is July 20, the exchange rate of the mark and the dollar hit in February 1991 After three interventions, the exchange rate of the dollar rose from 1.4470 to 1.5000, and the dollar rebounded by more than 500 points in two days. The central banks of 13 industrial countries, including the United States, joined forces again on August 11 to intervene, but the effect was even worse than the first time. The first round of intervention caused the dollar to rebound from 14,620 to 14,780, an increase of only 150 points, and the time limit only lasted for more than half an hour before the dollar fell again. The U.S. Federal Reserve intervened in the market four times within three hours at 1.4715, 1.4730 and 1.4770, selling marks and buying dollars, but only slightly rebounding the dollar. Early expectation is also an important reason for the foreign exchange market, the most can promote the market is the sudden event, and the expected event will often be reflected in advance to the foreign exchange market this is the first intervention than the second intervention effective some reasons and the two interventions ultimately can not change the dollar weakness, because the central bank can not make the foreign exchange market believe that the dollar exchange rate should be higher than the market price (2) In September 1992, the European Monetary System member countries to the foreign exchange market intervention in September 1992, the European Monetary System crisis, the foreign exchange market violently sold almost all the weak currency in the member countries, the British pound, Italian lira, Irish pound and so on all appear a substantial decline in the value of the currency by its strain is a non-member country such as Finlands currency, in the foreign exchange market also appeared a big drop, forcing these countries In this intervention, the European Community member states almost all spent a lot of money German Central Bank spent more than 12 billion U.S. dollars, the United Kingdom spent nearly 6 billion, and France to the German Central Bank to intervene in foreign exchange borrowed money, to the beginning of November to pay off this intervention to ease the contradictions of the European monetary system, but far from solving the problem of direct central bank Intervention in the foreign exchange market reflects the fundamental problem is that, since the market economy and floating exchange rate system conditions, foreign exchange rates should be decided by the market itself if you believe that the market supply and demand will automatically adjust the long-term exchange rate of foreign exchange, the central banks direct intervention at best only short-term effect, or to ease the violent rise or fall, and in the long run is futile to really control the foreign exchange rate, the only way for the central bank The implementation of the fixed exchange rate system and the fixed exchange rate system in the current world economic situation whether it works, is another problem of economic research but, for investors in the foreign exchange market, recognize the reasons for central bank intervention in the foreign exchange market, the way, the effect and the law, to improve the effectiveness of investment is very meaningful (3) early 2003 the Bank of Japan in 117.00 Annex again into the market and the previous difference is that Intervention in the market is not high-profile, but in the market quietly buy the dollar whether this intervention can be successful, please wait and see!