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Role of the Federal Reserve System of the USA and central banks of other countries «Big seven» on Forex
| Role of the Federal Reserve System of the USA and central banks of other countries «Big seven» on Forex All central banks including the Federal Reserve System of the USA (ФРС) influence the exchange market by means of change of discount rates and carrying out of currency transactions (interventions and currency purchases). From currency transactions by the most essential to Forex agreements on the return redemption (repurchase agreements), providing return sale by system of the same currencies purchased earlier at clients at the same price during caused time in the future (it is usual within 15 days) and with the certain interest rate are. The transaction volume under such agreement corresponds to volume of time injection of reserves in bank system. Influence on the exchange market is performed to weaken the currency. The agreement on the return redemption can impose obligations either on the client, or on bank (ФРС). The agreed sale and purchase agreements (matched sale-purchase agreements) are opposite to agreements on the return redemption. Carrying out the agreed sale and purchase agreement, bank or ФРС sells currency for the purpose of its immediate delivery to the dealer or foreign central bank, agreeing to redeem this currency back at the same price during caused time in the future (it is usual within 7 days). Such agreement is directed on temporary dump of reserves. The transaction volume under such agreement corresponds to volume of time dump of reserves. Influence on the market is directed thus on strengthening the currency. Placing of money concerns number of currency transactions in other central banks or международнх funds. Besides, ФРС, since 1962г., has concluded a number of agreements with other central banks about a currency exchange. For example, for rendering assistance to allies on war on exemption of Kuwait from the Iraq occupation in 1990-1991гг. Bundesbank and Japanese bank placed money in ФРС. Through other central banks the American installments in the World bank and the United Nations Organization т.п are produced. Interventions in the exchange market from exchequer and ФРС are directed on orderliness provision in the market or adjustment of exchange rates. They aren't directed on influencing a condition of financial reserves. Two kinds of currency interventions are known: barefaced (naked intervention) and sterile (sterilized). Barefaced, or unsterile intervention is connected exclusively with currency trade. Everything that occurs thus, is a purchasing or sale by Federal system of dollars for foreign exchange. Besides influence on the exchange market, change of a financial situation because of inflow or outflow of money thus takes place. Appreciable change of financial flows causes to correct the size of payments under dividends, to change the prices and to make other amendments at all levels of economy. Therefore influence of barefaced currency intervention is long-term. Sterile intervention is neutral, from the point of view of its influence on monetary receipts. As not many central banks feel desire that their interventions in the exchange markets вляли on all parties of economy, sterile intervention is preferable. The same concerns and the Federal Reserve System. Sterile intervention includes an additional measure within the limits of an initial foreign exchange transaction. This measure consists in the sale of government securities compensating a gain of reserves because of intervention. It is easier for understanding if to imagine that the central bank intends to finance a foreign exchange transaction at the expense of sale of certain quantity of government securities. As sterile intervention influences only a level of demand and offers of separate currency, its effect is short-term or medium-term. Source: http://forex-ea.ru | |
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