Question Details

Why do foreign market participants attempt to monitor the Fed- direct intervention 



1. Indirect Intervention. During the Asian crisis, some Asian central banks raised their interest rates to prevent their currencies from weakening. Yet, the currencies weakened anyway. Offer your opinion as to why the central banks’ efforts at indirect intervention did not work.

2. Monitoring of the Fed- Intervention. Why do foreign market participants attempt to monitor the Fed- direct intervention efforts? How does the Fed attempt to hide its intervention actions? The media frequently reports that “the dollar- value strengthened against many currencies in response to the Federal Reserve- plan to increase interest rates.” Explain why the dollar- value may change even before the Federal Reserve affects interest rates. 




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