Analyzing the Impact of Foreign Exchange Market Interventions

Introduction

The foreign exchange (forex) market plays a crucial role in the global economy, serving as a platform for currency exchange and influencing trade balances, inflation rates, and economic stability. Governments and central banks often intervene in this market to stabilize or influence their national currency’s value against others, aiming to achieve specific economic objectives. This paper seeks to analyze the impact of foreign exchange market interventions, examining the rationale behind such actions and their short-term and long-term effects on currency valuation, economic indicators, and market confidence.

Main Body

Foreign exchange market interventions can be broadly categorized into two types: direct and indirect interventions. Direct interventions involve the buying or selling of a currency by a government or central bank in the forex market. Indirect interventions, on the other hand, include changes in interest rates o