Korea Institute of Finance "High Success Rate of Foreign Exchange Intervention... Verbal Intervention 64%, Actual Intervention 79%"

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] The success rate of foreign exchange market interventions by domestic policy authorities has been found to be significantly high for both actual interventions and verbal interventions.

Namjong Kim, a research fellow at the Korea Institute of Finance, stated in the report "Analysis and Implications of Domestic Foreign Exchange Market Intervention Effects" on the 24th, "When interventions in the same direction within 10 days were treated as a single event and analyzed, verbal interventions showed a success rate of 64%, while actual interventions showed about 79%."

This result was based on examining whether the cumulative exchange rate change direction over five business days from the event end point matched the intended direction of the intervention.

Researcher Kim noted, "These results suggest that domestic foreign exchange market interventions are an effective means for stabilizing exchange rates," but also pointed out, "Excessive intervention can distort the natural price adjustment mechanism, and overly one-sided interventions may cause trade friction." Therefore, he added that (foreign exchange market interventions) need to be used timely for the purpose of volatility mitigation.

This analysis was conducted using a sample period from January 1, 2000, to December 31, 2018, and daily intervention data of the foreign exchange authorities were constructed from news articles and market reports.

This content was produced with the assistance of AI translation services.