Bank Intervention in the Forex Markets

Hello traders,

I would like to tell you about the Intervention of the Banks in the Forex markets and its Effects.

What is a Bank Intervention?
Each country has a Bank known as its Central Bank whose task is to oversee their country,s Forex rate and Forex reserves. In general a Central Bank of the Nation will hold large Forex Reserves which may be needed in the times of crisis like a Bank Intervention. There are certain times when the economy of the Country is not doing good and the Bank may plan to Enter in the Forex markets in order to Stabilize the Forex rates.

The Sole Purpose of a Bank Intervention is to benefit its own country but in the Process it makes large movements in the Forex currencies and this causes lots of Gains/ Losses to the Retails FX Traders.

What is the Catalyst for a Bank Intervention?
The main Catalyst or the Triggering event that will make a Central Bank to Intervene in the Forex markets can depend on Many factors like the Natural Calamity in the case of Bank of Japan or the need to maintain a Floor rate in the case of the Swiss National Bank. The sole Objective is to Stabilize the financial situation of the country with the Forex reserves.

How to Benefit from a Bank Intervention?
When a trader is constantly in touch with the Forex markets and the news he will know that whether or not their is a Potential Catalyst which will cause a Bank to Intervene in the Forex markets. If there are some Indications then he can well plan his trade with a lot of Free margins so that in the case of a large move in the FX markets he will stand to gain a lot of money.

Which Central Banks are more likely to Intervene?

  • Bank of Japan (BoJ)
  • Swiss National Bank (SNB)
  • European Central Bank (ECB)
  • Reserve Bank of India (RBI)
  • Federal Reserve (Fed)
  • Bank of England (BoE)
  • Reserve Bank of Australia (RBA)
  • Bank of Canada (BoC)
  • Reserve Bank of New Zealand (RBNZ)

In the On-going discussions i will tell you more about Bank Intervention and its Effects on the Forex markets