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  1. #1
    Rookie nsawork's Avatar
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    Smile Bank Interventions and its Effects

    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

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  2. #571
    Rookie layigold's Avatar
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    At any point in time , apex bank of any country might decide to devalue the nation currency whenever economic situation of the country calls for that . That will obviously affect the forex market especially if it happens to be one of the major currencies like USD , GBP and EURO. There are so many ways by which apex banks like FED, , BOE, ECB and all others achieve this . It takes a good understanding of fundamental analysis to decipher how market may react to this kind of news .

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  3. #572
    Rookie Azis Muslim's Avatar
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    Quote Originally Posted by layigold View Post
    At any point in time , apex bank of any country might decide to devalue the nation currency whenever economic situation of the country calls for that . That will obviously affect the forex market especially if it happens to be one of the major currencies like USD , GBP and EURO. There are so many ways by which apex banks like FED, , BOE, ECB and all others achieve this . It takes a good understanding of fundamental analysis to decipher how market may react to this kind of news .
    Good for us we can only worry about this once or few after months because every news that related to bank interest rates is released once a month or two. Seriously the damage of interest rate hike or cut is really amazing to trade with. What I do not really like about is when market moves only in spike, creating 50 pips up and 50 pips down and only show us a thin line without knowing where else to go. Nonetheless, their effects are frustrating and satisfying at the same time.

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  4. #573
    Rookie layigold's Avatar
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    Bank intervention would either strengthen or weaken the currency concerned and either of these scenarios provides good opportunity for forex traders who have sound knowledge of fundamental analysis to make money . Before you can take any of economic news indices successfully , you must have mastered fully the aspect of fundamental analysis of the market because market usually experiences a wild move during the time this kind of news on bank intervention hit the market

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  5. #574
    Rookie Toyen's Avatar
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    Quote Originally Posted by layigold View Post
    Bank intervention would either strengthen or weaken the currency concerned and either of these scenarios provides good opportunity for forex traders who have sound knowledge of fundamental analysis to make money .
    It is a normal thing for the bank intervention to either strengthens or weakens a currency. The reason is that the bank interventions will come out in different fashions, at times, it will be target the inflation or deflation condition. At times, it will be to deliberately weaken the currency of the country so that the trade balance will be positive. At times, it might have indirect negative effect of the economy before a positive impact will later come out of it.

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