Intraday timing of AUD intervention by the Reserve Bank of Australia: Evidence from Microstructural Analyses

34 Pages Posted: 21 Oct 2010 Last revised: 3 Oct 2013

Suk-Joong Kim

The University of Sydney Business School; The University of Sydney Business School

Peter Kjeld Andersen

UNSW Australia Business School, School of Banking and Finance

Date Written: October 20, 2010

Abstract

We add a new dimension to the debate of the efficacy and the timing of a central bank’s currency intervention. Utilising an enhanced proxy for intervention and high frequency tick-by-tick quote data, we estimate the approximate intraday timing of interventions by the Reserve Bank of Australia in the both the onshore and offshore USD/AUD markets for the period of 1996 to 2006. We detect interventions in the late onshore period, early European market, and again in the early New York market. We further find evidence to suggest the RBA choose those hours of higher volume, lower volatility and lower bid/ask spreads to conduct its non-intervention transactions. These results have important implications not only for institutions and corporations with a need to transact in the market, but also for hedge funds and other traders that may profit by trading against the RBA.

Keywords: RBA Intervention, Microstructure

JEL Classification: E44, G14, G15

Suggested Citation

Kim, Suk-Joong and Andersen, Peter Kjeld, Intraday timing of AUD intervention by the Reserve Bank of Australia: Evidence from Microstructural Analyses (October 20, 2010). Paris December 2010 Finance Meeting EUROFIDAI - AFFI; Journal of International Financial Markets, Institutions and Money, Vol. 21, No. 2, 2011. Available at SSRN: https://ssrn.com/abstract=1695026

Suk-Joong Kim (Contact Author)

The University of Sydney Business School ( email )

Sydney
Australia
+61 2 9114 0940 (Phone)

The University of Sydney Business School ( email )

Sydney
Australia
+61 2 9114 0940 (Phone)

Peter Kjeld Andersen

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

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