Currency intervention of the Central Bank of the Russian Federation. What is currency intervention

Currency intervention- a significant one-time targeted impact of the country’s central bank on the foreign exchange market and exchange rate, carried out through the sale or purchase by the bank of large quantities of foreign currency. Currency intervention is carried out to regulate the exchange rate of foreign currencies in the interests of the state. In short, foreign exchange intervention is the influence of a country's central bank on the foreign exchange market and exchange rate by purchasing or selling large quantities of foreign currency.

Currency intervention is the joint regulation of currency relations between participating countries, specifically expressed in a common currency policy towards third countries. Currency intervention is carried out with the active participation and assistance of member states of regional zones, within which a relatively stable exchange rate ratio is ensured. In this case, central banks or treasuries of participating countries are used in operations on the foreign exchange market in order to influence the exchange rates of their own country or a foreign one through the sale or purchase of foreign currency or gold. Currency intervention is, in form and in essence, a large-scale currency transaction carried out within a certain, usually short-term period.

In the Russian Federation, the term “currency intervention” is usually used in connection with the task of maintaining the Russian ruble, its stable exchange rate against the US dollar, when the Central Bank of the Russian Federation sells dollars in order to prevent the ruble from falling on the foreign exchange market and thereby affecting the purchasing power of money , exchange rates and the country's economy as a whole. Conversely, the purchase of foreign currency by the Central Bank of the Russian Federation entails a fall in the exchange rate of the Russian ruble. For interventions, as a rule, official foreign exchange reserves are used, so if there are large disturbances in the balance of payments system, foreign exchange intervention can ultimately lead to the depletion of the country's foreign exchange reserves without preventing the depreciation of the national currency.

Intervention in Forex

Participation of the Central Bank in the process of controlling prices on the foreign exchange market, through the purchase or sale of its own gold and foreign exchange reserves. As a rule, to strengthen the national currency, the Central Bank conducts a series of sales of foreign gold and foreign exchange reserves, and the opposite actions are carried out to weaken the national currency. Today, the Central Banks of countries such as China, Russia, Japan, etc. often take similar actions.

To increase the rate of the national currency, the national bank must sell foreign currencies, buying up the national one. This reduces the demand for foreign currency, and consequently increases the exchange rate of the national currency.

In order to lower the exchange rate of the national currency, the Reserve Bank sells the national currency and buys foreign currency. This leads to an increase in the exchange rate of foreign currency and a decrease in the exchange rate of the national currency.

Currency interventions can be divided into several types:

Verbal or fictitious intervention. Rumors of possible bank intervention also have an impact on the foreign exchange market. The Central Bank simply starts a rumor about an upcoming fictitious intervention, which contributes to the emergence of the necessary reaction. Often, to enhance real banking intervention, they talk about verbal intervention.

Real intervention. In this case, the operation is carried out openly, on one’s own behalf. After which data is published on how much money was spent on its implementation. Sometimes banks from two countries are involved, for which changes in the exchange rate are of mutual interest. Also, the actual intervention is carried out through various private banks, which carry out the transaction on behalf of the reserve bank.

It is worth noting the fact that verbal intervention is carried out much more often than real intervention, since it has a greater effect due to the unexpectedness of the implementation.

Carrying out frequent interventions is not a market method of regulating the exchange rate of the national currency. But, nevertheless, for example, the Bank of Japan continues to pursue an aggressive banking policy.

In addition, interventions can be classified towards.

Market intervention- intervention aimed at accelerating changes in the exchange rate of a currency in the direction of an already emerging but weak trend in its movement.

Intervention against the market- intervention aimed at returning the exchange rate to its previous level, i.e., at initiating a movement in the exchange rate of the national currency against the emerging trend. Sometimes it ends in failure.

In order for currency intervention to be successful, several conditions must be met:

1. Proper confidence on the part of market participants in the long-term policy of the Central Bank.

2. Significant change in fundamental economic indicators.

3. The need for a large amount of financial reserves in the Central Bank.

Quite often, foreign exchange interventions in the world market are carried out not by one reserve bank, but by a number of banks in different countries in accordance with their agreement among themselves.

An example is the decision of the G7 to support the Japanese economy and make it more competitive by depreciating the Japanese currency against the US dollar after the earthquake. On March 18, 2011, as a result of the concerted action of the Bank of Japan, the Central Bank of Europe and the Federal Reserve System of the United States of America, the price of the Japanese currency was reduced by more than 2% within a few minutes.

In addition to radical coordinated changes in exchange rates, foreign exchange interventions can be used to control the volatility (changeability) of the exchange rate, reducing the rate of its change, maintaining the liquidity of the foreign exchange market, countering or facilitating the import or export of capital, as well as to accumulate Central Bank reserves in a certain currency.

Similarly, the Russian Central Bank periodically conducts foreign exchange interventions to manage the exchange rate of the Russian ruble against the euro and the currency of the United States. Until July 8, 1995, the Bank of Russia kept the exchange rate of the Russian ruble in check through foreign exchange interventions, usually by selling foreign currency. On July 8, 1995, the so-called currency corridor was introduced - the minimum and maximum exchange rate of the Russian ruble to the dollar declared by the bank for a certain period. Since 2008, a bi-currency corridor has been established - in relation to the dollar and the euro. Actually currency corridor- this is a statement by the regulator that it is ready to carry out currency interventions, buying the national currency if its quote touches the lower limit, and selling if the upper limit is reached.

As a rule, central banks announce their plans for foreign exchange intervention in advance and publicly. Monitoring such news is extremely important for investors, especially forex market participants, since a position taken against such a large foreign exchange market speculator as a central bank can lead to catastrophic financial consequences 30 .

Today I want to talk about Central Bank currency interventions(central banks). Surely everyone who cares about the hryvnia (and this is millions of people) follows the news on this matter, in which they often hear “The Central Bank carried out an intervention”, “The Central Bank will carry out interventions” and something similar. So, from today’s publication you will learn what the Central Bank’s currency intervention is, why it is carried out, what is the purpose of currency interventions, what types of currency interventions can be used and much more.

Let's start from the beginning, first things first.

What is foreign exchange intervention?

Currency intervention- this is one of the monetary policy instruments of the Central Bank of any state, aimed at restraining an unwanted fall or strengthening of the national currency, in which the Central Bank purchases or sells large quantities of foreign currency on the open market for the national currency, thereby strengthening or depressing its exchange rate. Synonyms for the word “intervention” are “invasion”, “intervention”.

Central Bank interventions in the foreign exchange market are carried out through the use of the country's foreign exchange reserve: the Central Bank sells or buys those currencies whose value it wants to influence.

The purpose of foreign exchange intervention.

Many people mistakenly believe that the Central Bank carries out currency interventions only to strengthen the national currency. In fact, this can only be attributed to developing countries such as Russia or Ukraine, where national currencies are predominantly devalued. There are countries in the world where the opposite problems can be observed: national currencies are overly strengthened, which is always bad for export-oriented states. And then the Central Bank carries out foreign exchange interventions in order, on the contrary, to lower the exchange rate of the national currency. For example, the Central Banks of Japan and Switzerland have periodically resorted to similar measures in recent years.

There are also cases around the world where the Central Banks of different countries simultaneously carried out currency interventions in order to support the currency of one country. For example, this happened when it was necessary to support the Japanese economy after the earthquake in 2011. Then it was necessary to bring down the high exchange rate of the yen, and joint efforts were made for this by the Bank of Japan, the European Central Bank and the US Federal Reserve.

Thus, the main goal of foreign exchange intervention is to change the value of the national currency, and it can be either towards strengthening or towards weakening. In some cases, interventions are carried out to stabilize the exchange rate in order to stop the fall or strengthening of the national currency.

Mechanism of foreign exchange intervention.

The mechanism of currency intervention is quite simple. If the Central Bank needs to strengthen the exchange rate of the national currency against foreign currency, it sells large quantities of foreign currency, thereby reducing its value. If it is necessary to weaken the exchange rate of the national currency, then the Central Bank, on the contrary, buys large quantities of foreign currency for the national currency, thereby increasing the exchange rate and reducing the value of the national currency.

Types of currency interventions.

The following types of foreign exchange interventions can be distinguished:

1. Verbal intervention. It often happens that the Central Bank does not actually intervene, but only spreads rumors that it is going to do so. In some cases, verbal intervention may have an effect: foreign exchange market participants will adjust their actions taking into account possible intervention, and this will affect the change in the exchange rate in the desired direction.

2. Real intervention. This is the direct participation of the Central Bank in operations on the foreign exchange market using its financial resources. At the same time, real intervention, in turn, can also be of two types:

– Direct intervention. In this case, the Central Bank openly enters the market and carries out transactions on its own behalf, reporting this in official news;

– Hidden intervention. Here the Central Bank acts through agents - commercial banks, without advertising the intervention. Hidden currency interventions, as a rule, have a more serious impact on the market, which is caused by the effect of surprise: traders do not understand what is happening, why the exchange rate begins to change sharply and psychologically perform operations in the right direction. Therefore, the Central Bank resorts to hidden interventions more often, although then, later, information about the participation of the regulator is usually declassified.

The effectiveness of foreign exchange interventions.

Interventions by the Central Bank in the foreign exchange market are a fairly strong tool for regulating the exchange rate, which the Central Bank, as a rule, uses in extreme cases. Therefore, on the one hand, their effectiveness can be considered one of the highest among all other instruments of the Central Bank’s monetary policy. But, on the other hand, when these “extreme cases” occur, this means that the devaluation or excessive strengthening of the national currency is already of a serious systemic nature, so even interventions sometimes cannot change the situation. Thus, the reserve fund funds may actually be wasted.

In any case, if the Central Bank began to conduct currency interventions, especially when it comes to large volumes of interventions, this means that the situation with the national currency is critical. But the effectiveness of interventions depends on the general policy of the Central Bank and other fundamental factors.

In any case, it should be understood that the Central Bank can carry out foreign exchange interventions only for some time until the foreign exchange reserves allocated to them for these operations are spent. If during this period there are no desired changes in the exchange rate, then it may change in an undesirable direction even more.

Volumes of foreign exchange interventions.

The volume of foreign exchange interventions is also of great importance. Sometimes the Central Bank can carry out small interventions, even imperceptible at first glance, which, nevertheless, have a stabilizing effect. In other cases, the intervention can be very large-scale, leading to a change in the exchange rate, for example, by 200-300 points.

The Central Bank determines the optimal volumes of foreign exchange interventions based on its monetary policy. It is clear that large-scale interventions are always more effective, but, on the other hand, they lead to a significant expenditure of state reserves, and the effect they have on the national currency exchange rate can be short-term: after some time it returns to its previous positions.

How to recognize currency intervention?

As I already said, the Central Bank often carries out hidden interventions, without announcing their implementation and acting through agent banks. In this case (as, indeed, with direct actions of the regulator), you can always see currency intervention carried out on , including the national currency of the state.

If there is a clearly defined trend of movement of the national currency exchange rate in a certain direction, and suddenly, for obvious reasons, the exchange rate begins to move sharply, in a short period of time, in the opposite direction - it can be said with a high degree of probability that the Central Bank carried out an intervention.

The greater the volume of currency interventions, the more noticeable they will be visible on the charts. I bring to your attention a clear example of the intervention carried out in August 2012 by the Bank of Japan.

On the chart you can see the changes in quotes at that time. At that time, the yen exchange rate was excessively strengthening against the dollar and the Bank of Japan intervened in the foreign exchange market to bring it down. As you can see in the chart, thanks to the intervention, the yen exchange rate fell by more than 300 points, however, this was only a short-term effect: then it returned to its previous positions and began to strengthen even more.

Currency interventions of the Central Bank of the Russian Federation.

Recently, the Central Bank of Russia has been actively using the intervention tool to support the ruble exchange rate. Thus, already in 11 months of 2014, more than $70 billion of foreign exchange reserves were spent on foreign exchange interventions by the Central Bank of the Russian Federation (according to official information: cbr.ru/hd_base/default.aspx?prtid=valint), despite the fact that only about 3 billion dollars were purchased.

The main peak of currency interventions by the Central Bank of the Russian Federation occurred in May (then the Central Bank managed to stabilize the ruble due to this) and October (when the interventions no longer had the desired effect). In December, the Central Bank of the Russian Federation continues to carry out fairly large foreign exchange interventions, so it is likely that by the end of 2014 the total amount of Russia’s gold and foreign exchange reserves spent on maintaining the ruble exchange rate will approach $100 billion. This is not so scary, since the reserves are intended to be used in the event of force majeure situations, which we are all now seeing with the ruble. Another thing is scary: the current currency interventions of the Central Bank of the Russian Federation do not have the desired effect: the ruble still continues to fall in price, and very strongly. However, it can be assumed that without interventions it would have fallen even much faster.

The mistake of the Central Bank here, in my opinion, is that it began to interfere in the pricing of the ruble (including through interventions) too late, when the devaluation had already gained momentum, and now nothing can stop it. As you can see from the table above, in July, August, September, when the fall of the ruble was just beginning and was not systemic in nature, the Central Bank of the Russian Federation distanced itself from performing one of its direct tasks - maintaining the exchange rate of the national currency, and did not interfere in the processes, repeatedly declaring this in their public speeches.

It is likely that with such actions (or rather, inaction), he specifically wanted to weaken the ruble in order to “close holes in the budget,” but perhaps he did not expect that the devaluation would accelerate and turn out to be so strong. Now even fairly large-scale currency interventions by the Central Bank of the Russian Federation cannot stop it.

Now you have an idea of ​​what currency interventions by the Central Bank are, what they are and how they happen, and you will be able to more competently perceive news about interventions and use them for or planning personal finances.

That's all. Stay on, improve your financial literacy and master effective personal finance management, new opportunities for earning money and investing. See you again on the pages of the site and forum!

Currency intervention- the action of the country's central bank in the foreign exchange market, aimed at maintaining or weakening the national currency, during which a large volume of currency is purchased or sold at a time or in a limited period of time. The objective of foreign exchange intervention is to maintain the exchange rate in the interests of the state.

Quite often, foreign exchange interventions in the world market are carried out not by one central bank, but by a number of banks in different countries in accordance with their agreement among themselves.

An example is the decision of the G7 to support the Japanese economy and make it more competitive by depreciating the Japanese yen against the US dollar after the earthquake. On March 18, 2011, as a result of a concerted action by the Bank of Japan, the European Central Bank and the US Federal Reserve, the price of the Japanese currency was reduced by more than 2% within a few minutes.

In addition to major coordinated changes in exchange rates, foreign exchange interventions can be used to control the volatility (variability) of the exchange rate, reduce the rate of its change, maintain the liquidity of the foreign exchange market, counteract or promote the import or export of capital, as well as to accumulate central bank reserves in a certain currency.

Similarly, the Bank of Russia periodically carries out foreign exchange interventions to manage the exchange rate of the ruble against the euro and the US dollar. Until July 8, 1995, the Central Bank of the Russian Federation kept the ruble exchange rate in check through foreign exchange interventions, usually by selling foreign currency. On July 8, 1995, the so-called currency corridor was introduced - the minimum and maximum exchange rates of the ruble to the dollar declared by the bank for a certain period. Since 2008, a bi-currency corridor has been established - in relation to the dollar and the euro. In fact, a currency corridor is a statement by the regulator that it is ready to carry out currency interventions, buying the national currency if its quote touches the lower limit, and selling if the upper limit is reached.

In 2015 The Bank of Russia for the first time introduced interventions to replenish international reserves. From May to July 2015 he bought foreign currency on the stock market. The interventions were not intended to influence the ruble exchange rate and were carried out in small volumes of $100-200 million evenly throughout the day. A total of $10.1 billion was purchased. However, due to the unfavorable situation in the foreign exchange market, interventions were stopped. According to the Bank of Russia, interventions to increase reserves are planned to be carried out until the volume of reserves grows to $500 billion. The announced figure represents a long-term benchmark without obligations regarding the time and size of regular operations. There were no interventions to replenish international reserves in 2016-17. Their resumption is possible if price stability is achieved, low inflation expectations and a stable ruble exchange rate.

The word intervention comes from the Latin interventio - interference. Currency intervention (CI) is one of the extreme measures taken by the central banks of countries (in Russia this is the Central Bank of the Russian Federation), which is nothing more than an intervention in regulating the exchange rate of the national currency.

In fact, foreign exchange intervention is the purchase or sale (depending on the goals) of national currency for foreign currency, in volumes sufficient to have the desired impact on the exchange rate.

Objectives of foreign exchange intervention

1. Regulation of the national currency exchange rate. Either the national currency is purchased for the reserve currency, or, conversely, the reserve currency is purchased for the national currency. In the first case, the intervention is aimed at increasing the exchange rate of the national currency, in the second case, at reducing it. The US dollar and the Euro currently serve as reserve currencies.
2. Regulation of the national currency exchange rate. Small interventions can be aimed at smoothing out fluctuations in the exchange rate that do not go beyond a certain corridor. This is part of the measures aimed at stabilizing the exchange rate of the national currency.
3. Replenishment of reserve reserves of the Central Bank. Often, the purchase of a large volume of reserve currency is not connected with somehow influencing the rate of one’s own, but in order to simply replenish one’s reserves. After all, the Central Bank’s ability to further influence the exchange rate of its currency in the future directly depends on the size of these reserves.
4. Maintaining liquidity of the country's foreign exchange market. Finally, the goal of VI may be to increase the national currency. For this purpose, the Central Bank acts as a counterparty to transactions for the sale of national currency.

Types of foreign exchange interventions

All currency interventions currently carried out by Central banks of different countries can be classified into several main types.

Firstly, there are three main types:

1. Open VI. The Central Bank’s intention to intervene is announced in advance and the specific date and time of this event is announced. Then, at the appointed time, the reserve currency is purchased or sold for the national currency, which has a corresponding impact on its exchange rate. However, the strength and duration of this influence are not always predictable (much depends on the amount of foreign exchange reserves that the Central Bank is willing to spend).
2. Verbal VI. The Central Bank announces its intention to conduct currency intervention and that is all. There are no real actions on the part of the Central Bank, but the announcement of the intention itself is enough to influence the decisions of the bulk of market players and, accordingly, the exchange rate. As a rule, without waiting for a real injection of funds, the market, after a slight shift, rolls back.
3. Indirect VI. It is carried out by the Central Bank not directly, but through the intermediary of the country’s largest commercial banks. Commercial banks, as organizations dependent on the Central Bank, are forced to obey.

Each of these three types, in turn, can be divided into two more types according to the direction:

1. In the direction of the emerging price trend to accelerate and (or) strengthen it;
2. In the direction against the emerging price trend to return the exchange rate to the previous level. It is used, for example, when the exchange rate goes beyond the currency corridor**.

In addition, all interventions can be divided according to the degree of involvement of other participants in them:

1. Unilateral VIs are carried out by the Central Bank of only one country. The success of this kind of intervention directly depends on the size of the foreign exchange reserves involved in it. But there are no guarantees that such VI will ultimately lead to the intended goal.
2. Bilateral (joint). Such interventions are carried out by mutual agreement between the central banks of the two countries and have a much greater chance of success.
3. Multilateral Currency interventions are the most effective of all of these. An example that has already become a textbook example was the multilateral currency interventions aimed at strengthening the exchange rate of the Japanese yen in 2011. These measures were taken by a number of major countries to support the Japanese economy after the strong earthquake that occurred on March 11, 2011.

Finally, all VIs can be classified according to their impact on the monetary base of the state:

1. Sterilized VI accompanied by a reverse operation on the country’s domestic money market. For example, the sale of the Euro on the foreign market is accompanied by the purchase of short-term government bonds of the European Union countries on the domestic money market.
2. Unsterilized VI- this is simply a purchase or sale, without accompanying a reverse operation on the country’s domestic money market.

Implications for the trader

For a trader trading in the foreign exchange market, it is very important to monitor official statements regarding upcoming interventions. After all, otherwise he may end up in a deal directed against such a colossus as the country’s central bank with its huge reserves.

In addition, timely information about an upcoming VI can allow a trader to “ride the wave”, making money on changes in the exchange rate. And a change in course, as a rule, inevitably follows statements of this kind, even if they are not followed by real actions on the part of the Central Bank (in the case, for example, of verbal VI). Another thing is that verbal intervention is always followed by an inevitable rollback, while real intervention has every chance of resulting in a new trend (but there are no guarantees here).

Information about upcoming joint interventions on the part of a number of states is generally a bonanza for any currency trader. After all, this kind of VI, as a rule, is always doomed to success and a trader can almost guarantee making huge money on them. However, information of this kind, in almost all 100% of cases, belongs to the category of insider information (it is not published in the media and is known only to a narrow circle of people).

** The currency corridor represents the boundaries of the national currency exchange rate established by the Central Bank. When the exchange rate reaches one of the boundaries, it is a signal to begin foreign exchange intervention in order to return the exchange rate within the corridor. If the exchange rate reaches the lower limit of the currency corridor, the Central Bank begins to buy the national currency for the reserve currency (dollars and Euros), thereby stimulating its growth. If the rate reaches the upper limit of the corridor, then the Central Bank begins to buy the reserve currency for the national currency. In Russia, the currency corridor was introduced twice, in 1995 (lasted only 2 months) and in 2008 (lasted until 2014). Currently, our country does not have an established currency corridor, and the Central Bank can conduct VI at its own discretion.

Currency intervention is a one-time large-scale transaction involving the purchase or sale of foreign currency by the Central Bank of the state. Manipulation pursues one single goal - adjusting the exchange rate of the national currency in the foreign exchange market solely in the interests of the state. In most situations, the purpose of intervention is to strengthen the national currency relative to the foreign currency. In more rare cases, the transaction is carried out with the aim of weakening the currency.

Currency intervention is usually used as the main lever regulating monetary policy. Large purchases or sales of foreign currency are initiated by the central banks of countries. Through such actions, central banks of states are able to significantly influence the movement of the foreign exchange market and the exchange rate of a certain monetary unit. Currency intervention by the central bank of any country implies joint regulation of currency relations, in which IMF member states take part. This is expressed in the unidirectionality of actions towards third world countries. The intervention is carried out in the active interaction of different states, which are responsible for ensuring the stability of the exchange rate of a particular currency in a particular region. Not only banks, but also treasuries can be involved in the process of making large transactions. The impact can be exerted not only on the national currency, but also on the foreign one. The purchase or sale of foreign currency can be supported by similar manipulations with gold. The procedure has a clearly defined time frame and is carried out within the agreed time frame.

The Central Bank has the authority to participate in exercising control over prices on exchange markets through the acquisition or sale of gold and foreign exchange reserves that it owns. The strengthening of the currency is facilitated by the sale of gold and foreign exchange reserves, and the weakening must be preceded by purchases. Such manipulations are actively practiced in Russia, Japan and China.

Intervention Examples: Japan

There are a huge number of examples of financial manipulation in history. Thus, in 2011, Japan was forced to take measures to reduce the value of its currency due to economic problems in the US and EU countries. The head of the Japanese Ministry of Finance said that the yen is overvalued against the dollar and other currencies due to a large amount of speculation in the foreign exchange market. The exchange rate of the country's national currency reflected a false picture of the state of its economy. The result of negotiations with the Central Banks of Western countries was the decision to conduct a joint intervention. During 2011, Japan purchased large quantities of foreign currency several times, injecting its national currency into the foreign exchange market. Trillions of yen, introduced into global financial circulation, made it possible to reduce the exchange rate by 2% and balance the economy.

Intervention in Russia

The second striking example can be observed in Russia. Until 1995, the Central Bank of the Russian Federation maintained the exchange rate of the national currency through sales of foreign currency. Since July 1995, the financial institution has adopted the concept of a currency corridor. Its goal was to maintain the value of the ruble in a range between fixed minimums and maximums for a certain period of time. Due to changes in the world economy, such a decision could not be maintained in an active state for a long time. The outdated model of monetary policy became useless by 2008. It was from this period that the decision was made to introduce a dual-currency corridor. This monetary policy model is based on the ratio of the Russian national currency to the dollar and euro. With her help, the course was detailed. If we look at it globally, the introduction of a currency corridor implies an adjustment of the ruble exchange rate against a foreign currency through financial manipulation, also known as foreign exchange intervention.

Mechanism for increasing the exchange rate of the national currency

In order to increase the exchange rate of the national currency, intervention is carried out in the foreign exchange market. The Central Bank is actively selling dollars. Alternatively, any other convertible currency can be sold. As a result, there is an oversupply of it in the financial market. At the same time, the national currency is being purchased, which automatically stimulates the active formation of demand for it. The exchange rate is depreciated by selling the national currency in order to fully satisfy the demand that has formed in the market. At the same time, foreign banknotes are being bought up, which becomes a prerequisite for the formation of an artificial deficit.

Types of interventions

There are two types of foreign exchange intervention. A fictitious procedure, also known as a verbal procedure, is a kind of rumor, a “decoy,” which is initiated by the Central Bank in order to have a certain influence on the movement of the foreign exchange market. Sometimes false information is enough to radically change the situation on the foreign exchange market. The procedure can also be used as an amplifier for real financial manipulation. The actual format of the procedure is carried out by the Central Bank. At the end of the event, reliable data and figures reflecting the amount of funds spent by the financial institution are published in the media. It is a common practice to combine the actions of several banks to achieve a mutually beneficial effect.

Specifics of application of interventions

Verbal currency intervention is used much more often than real one. The desired effect can be achieved solely thanks to the surprise factor. Manipulation is not a common practice in financial policy. At the same time, some states, in particular Japan, are very aggressive on this issue. Currency interventions (the Central Bank can carry them out only by prior agreement) can be aimed both at strengthening the current trend in the market, and with the expectation of its reversal. As practice shows, in the latter case, achieving the goal is very problematic.

Under what conditions is it important to carry out financial manipulation or why the actions of the Central Bank of the Russian Federation were ineffective

Against the background of the events of the end of last year and the beginning of 2015, Russia actively used and continues to use financial leverage in its practice. The latest currency interventions by the Central Bank of the Russian Federation ended in failure due to the fact that for the measure to be effective there must be some support. Firstly, this is the confidence of foreign exchange market participants in the bank’s policy, which must necessarily be long-term in nature. In parallel, an active change in economic indicators must be carried out. The bank must have a large amount of gold and foreign exchange reserves and financial resources. Against the background of falling oil prices in the world, the Central Bank of the Russian Federation cannot boast of decent reserves. The discrepancy between the budget, which emphasized the cost of fuel within $60, and the actual situation, played a big role. Currency interventions of the Central Bank of the Russian Federation today, due to the current circumstances, are practically meaningless.

The relationship between money supply and interventions in the United States

The US central bank's foreign exchange intervention in foreign markets is regulated by the Federal Reserve's foreign operations manager in New York. It, in turn, is controlled by representatives of the Federal Open Market Committee. The procedure and duration of financial manipulations are determined by the State Treasury of America. The US Reserve System brings this tool to life. More recently, intervention was perceived as one of the instruments for conducting financial and credit policy of countries. Today it has become obvious that intervention has a direct impact on internal monetary reserves, and therefore on the money supply in circulation. The Fed, by purchasing one currency, sends a large number of dollars to the market. The reserve increases by the size of the purchased assets, and the amount of infused funds is multiplied by the money multiplier. A decrease in the value of the dollar due to an increase in the money supply reduces economic interest rates. Demand is decreasing. In the domestic market the situation is the opposite. The depreciation of the exchange rate leads to increased demand for imports. Holders of large investment portfolios freeze in anticipation of the currency's growth, thereby reducing operations with the latter on long time frames. The effect that can be achieved thanks to the intervention of the Central Bank in the foreign exchange market of the external type does not always coincide with positive phenomena in the domestic economy.

Interventions in Russia

Let's consider the situation on the territory of Russia. The country is characterized by a raw material type of economy, which does not allow imports to contribute to the growth of the national currency. That is why currency interventions by the Bank of Russia and systematic injections of dollars and euros into the market are mandatory. If this is not done, there is a high risk of the collapse of the institution. But the current situation in 2015 led to the fact that the currency interventions of the Central Bank of the Russian Federation have now become completely useless. Disorders in the country's balance of payments have depleted reserves. About $5 billion poured into the international market in order to support the ruble since the beginning of December last year did not bring the expected effect and went virtually unnoticed by market participants. Already on November 10, 2014, due to the inability to control the exchange rate, the ruble was allowed to float freely. The Central Bank of the Russian Federation carries out currency interventions in extremely rare cases.