What Is Currency Jawboning?
Currency jawboning is when a central bank or government uses rhetoric in an attempt to influence the value of their currency.
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
-----
We have a question from Sergiy asking what does currency jawboning mean? Thanks for the question Sergiy.
Currency jawboning is basically when central banks or sometimes governments tries to talk down or talk up their currencies in an attempt to push down it’s value or stop its assent or stop it’s devaluation.
There are many reasons why central banks and governments would like to see their currencies cheaper, some of them might be due to export competitiveness, so if your currency gets too expensive it hurts exports, so being very reliant on exports as a main source of GDP growth obviously means you need to make sure your currency isn’t too strong versus your major trading partners.
However in terms of devaluation, there is also reasons for central banks and governments to want to stop their currency from devaluing too much as it will push up the prices of imported goods and can have negative impacts on their debt if their currency suddenly appreciates so low where they can’t settle their debt which might be denominated in another currency which is much stronger.
Now there are of course policy tools that will allow central banks to alter the value of their currencies such as altering interest rates or by changing the money supply with QE or QT, or by performing explicit forward guidance.
However, sometimes the banks or even government officials can try to talk down or talk up or jawbone their currency in an attempt to slow it’s appreciation if it has been appreciating too much or try to slow its depreciation if it has been depreciating too much, or if they think it’s overvalued or undervalued versus it’s counterparts.
Jawboning usually involves verbal intervention instead of actual intervention, and if the bank is credible can have the desired effect. They can do this by pointing out a specific price level or exchange rate where they want the currency to trade at and can threaten intervention if it reaches those levels.
So, t’s basically just central banks or government officials trying to talk up or talk down their currencies.
-----
If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
-----
We have a question from Sergiy asking what does currency jawboning mean? Thanks for the question Sergiy.
Currency jawboning is basically when central banks or sometimes governments tries to talk down or talk up their currencies in an attempt to push down it’s value or stop its assent or stop it’s devaluation.
There are many reasons why central banks and governments would like to see their currencies cheaper, some of them might be due to export competitiveness, so if your currency gets too expensive it hurts exports, so being very reliant on exports as a main source of GDP growth obviously means you need to make sure your currency isn’t too strong versus your major trading partners.
However in terms of devaluation, there is also reasons for central banks and governments to want to stop their currency from devaluing too much as it will push up the prices of imported goods and can have negative impacts on their debt if their currency suddenly appreciates so low where they can’t settle their debt which might be denominated in another currency which is much stronger.
Now there are of course policy tools that will allow central banks to alter the value of their currencies such as altering interest rates or by changing the money supply with QE or QT, or by performing explicit forward guidance.
However, sometimes the banks or even government officials can try to talk down or talk up or jawbone their currency in an attempt to slow it’s appreciation if it has been appreciating too much or try to slow its depreciation if it has been depreciating too much, or if they think it’s overvalued or undervalued versus it’s counterparts.
Jawboning usually involves verbal intervention instead of actual intervention, and if the bank is credible can have the desired effect. They can do this by pointing out a specific price level or exchange rate where they want the currency to trade at and can threaten intervention if it reaches those levels.
So, t’s basically just central banks or government officials trying to talk up or talk down their currencies.
-----
If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
