| Abstract: |
Intervention operations are used by governments to manage their exchange rates
but officials rarely confirm their presence in the market, leading inevitably
to erroneous reports in the financial press. There are also reports of what we
term, unrequited interventions, interventions that the market expects but do
not materialize. In this paper we examine the effects of various types of
intervention news on intra-day exchange rate behavior. We find that unrequited
interventions have a statistically significant influence on returns,
volatility and order flow, suggesting that the expectation of intervention,
even when governments do not intervene, can affect currency values. |