What is currency intervention? How central banks push exchange rates
By SendPay Business · · 2 min read
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Currency intervention is when a central bank or government buys or sells large amounts of currency to change its exchange rate. To weaken its currency it sells its own money; to strengthen it, it uses its foreign currency reserves to buy its own money back.
Why they do it
- To stop a currency rising so fast that exporters struggle.
- To stop a sharp fall that pushes up import prices and inflation.
- To calm markets when moves become disorderly.
Well-known cases
In 2011 the Swiss National Bank set a floor of 1.20 francs per euro to stop the franc rising, then dropped it without warning in January 2015, and the franc jumped. In 2022 Japan's authorities bought yen for the first time in decades to slow its fall.
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Intervention can shift rates in the short term, especially when it surprises markets. Over the longer run, interest rates and the wider economy usually matter more, and a central bank can run short of reserves if it fights the market for too long.
Where SendPay fits
SendPay platforms let customers hold GBP, EUR and USD and exchange between them at a fee the platform owner sets, powered by licensed partners. SendPay doesn't offer trading.
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Questions people ask
Where does a pegged currency sit in its band?
See the band and what a broken peg would mean.
Currency peg calculator →What is a safe-haven currency?
A currency investors buy when markets are nervous.
Safe-haven currencies →What is a currency peg?
When a country fixes its currency's value against another currency.
Currency pegs →How do interest rates affect exchange rates?
Higher expected rates tend to make a currency more attractive.
Rates and currencies →Read next
Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.