01782cas a2200241 a 4500 AALejournalIMF021042 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513547664 1018-5941 BD-DhAAL BD-DhAAL Sandri, Damiano. FX Intervention to Stabilize or Manipulate the Exchange Rate? : Inference from Profitability / Damiano Sandri. Washington, D.C. : International Monetary Fund, 2020. 1 online resource (24 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We analyze the profitability of FX swaps used by the central bank of Brazil to shed light on the rationale for FX intervention. We find that swaps are profitable in expectation, suggesting that FX intervention is used to stabilize the exchange rate in the face of temporary excessive movements rather than to manipulate it away from fundamental values. In line with this interpretation, we find that the scale of FX intervention responds to the degree of exchange rate misalignment relative to UIP conditions. We also document that intervention is more aggressive when there is less uncertainty about the medium-term level of the exchange rate and when the exchange rate is overvalued rather than undervalued. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2020/090 Full text available on IMF http://elibrary.imf.org/view/journals/001/2020/090/001.2020.issue-090-en.xml IMF e-Library