2011-12-29 11:11:29 版主
The Reserve Bank tries to play a role in providing a comfort cushion by intervening from time to time in the foreign exchange market with a view to limiting its more extreme fluctuations.
Whether the central bank should be doing this, and whether it actually can influence exchange rates in the face of market forces, are matters of some contention.
From its own analysis, the Reserve Bank is persuaded that, on balance, it plays a useful role in limiting overshooting in the market.
The first question is: can a central bank out-guess the market in temp3s of where the underlying market forces are taking the exchange rate? More interventiongs than not, I think, historically, have been when the central bank has been betting against the market. You may recall in 1992 when you had the upheavals in the European currencies, where there were a lot of bets against the markets and a lot of money was lost on the part of a lot of countries, including the Bank of England. So that basically, there’s a real risk in central bank intervention.
I think central bank intervention is dangerous. They’re betting on one side of the market and then that gives speculators a one-sided bet, because they know that they can’t really lose by going on the other side.