Working Paper

Systematic Intervention and Currency Risk Premia


Using data for the trades of 19 central banks intervening in currency markets, we show that leaning against the wind by individual central banks leads to "systematic intervention" in the aggregate central banking sector. 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.


Maik Schmeling
Lucio Sarno
Lukas Menkhoff


Publication Date
JEL Classification
F31, G10, G12