Official FX interventions through derivatives

Emanuel Kohlscheen, Sandro C. Andrade

Research output: Contribution to journalArticlepeer-review

14 Scopus citations


We use high-frequency data to study the effects of currency swap auctions carried out by the Brazilian Central Bank on the USDBRL exchange rate. We find that official currency swap auctions impact the exchange rate in a significant way, even though they do not directly alter the supply of foreign currency in the market. We show that during our sample period auctions of contracts in which the Central Bank took a short position in USD had larger effects than those in which the Central Bank took a long position. The supply of currency swaps to the market provides an alternative for traders that demand foreign currency for financial (speculative or hedging) rather than transactional reasons, and thus affects the demand for foreign currency and its price. This mechanism is likely to be particularly relevant when forecasters extrapolate exchange rate trends at short-term horizons.

Original languageEnglish (US)
Pages (from-to)202-216
Number of pages15
JournalJournal of International Money and Finance
StatePublished - Oct 2014


  • Brazil
  • Derivatives
  • Exchange rate
  • F30
  • Intervention

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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