Press Release

U.S. Monetary Authorities Did Not Intervene in FX Markets During the Fourth Quarter

February 09, 2017

NEW YORK – The U.S. monetary authorities did not intervene in the foreign exchange markets during the October – December quarter, the Federal Reserve Bank of New York said today in its quarterly report to the U.S. Congress.

In the fourth quarter of 2016, the dollar appreciated against all major currencies, with the Federal Reserve Board’s trade-weighted major currency dollar index rising by 6.4 percent, reaching its highest level since 2003. The appreciation of the dollar was primarily driven by the notable rise in U.S. Treasury rates and increased market expectations for additional rate increases by the Federal Open Market Committee (FOMC). Most of this price action occurred after the U.S. election and was attributable to widespread expectations for a shift toward more expansionary fiscal policy by the incoming U.S. administration. The dollar appreciated against the euro by 6.8 percent and the Japanese yen by 15.4 percent, mostly driven by widening interest rate differentials and adjustments to investor positioning. The dollar also broadly appreciated against emerging market currencies. Of particular relevance for the trade-weighted dollar were depreciation of the Mexican peso and Chinese renminbi, against which the dollar appreciated 6.9 and 4.1 percent, respectively.

The report was presented by Simon Potter, executive vice president of the Federal Reserve Bank of New York and the Federal Open Market Committee’s manager for the System Open Market Account, on behalf of the Treasury and the Federal Reserve System.

The full report is available on the New York Fed’s website.

Contact
Suzanne Elio
(212) 720-6449
suzanne.elio@ny.frb.org