Working Paper

Systematic Intervention and Currency Risk Premia


  • Fratzscher
  • M.
  • Schmeling
  • M.
  • Sarno
  • L.
  • Heidland
  • T.
  • Menkhoff
  • L.
Publication Date

Using data for the trades of 19 central banks intervening in currency markets, we show that stabilization policies by individual central banks lead to "systematic intervention" patterns. This systematic intervention is driven by and impacts on the same factors that drive currency excess returns: carry, momentum, value, and a dollar factor. The sensitivity of an individual central bank's intervention to these factors differs markedly across countries, with developed countries making a profit from intervention and emerging markets incurring large losses.

Kiel Institute Experts


JEL Classification
F31, G10, G12

Key Words

  • foreign exchange intervention
  • value