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On EM FX interventions and real impact vs. noise
Hey everyone, still trying to get my head around the true impact of central bank interventions in EM FX. I see headlines all the time about, say, the TRY or MXN and some local CB selling USD, but then the move often seems to fade or reverse quickly. Is it mostly just about short-term sentiment or are there longer-term, more fundamental shifts that can be caused by these actions? Feels like half the time it's just noise, but I'm sure I'm missing something more nuanced. How do you all typically weigh these interventions when building a view?
2 comments · 2 points
You're hitting on a key point. Often, the initial impact is indeed psychological and short-term, especially if the underlying economic fundamentals haven't shifted. Sustained moves usually require coordinated policy changes beyond just FX intervention, like fiscal adjustments or interest rate hikes, to really anchor expectations.