Our Exchange Market Pressure indices, which we introduced in a recent Global Macro Views, show how policymakers in major emerging markets respond month by month to pressure on the value of their currencies. For example, if a currency faces underlying appreciation pressure, the central bank may let it strengthen in response to market forces, or may intervene in the spot or forward FX markets and accumulate additional reserves in order to manage the exchange rate and prevent erosion of its competitiveness. The relative use of these strategies varies across countries and over time. Given that maintaining a peg when an appreciation is warranted can be interpreted as currency manipulation, sustained one-sided intervention has been a longstanding driver of trade tensions; however, there has been a general trend of increasing openness toward exchange rate flexibility.

Cross-Country Summary

China

Saudi Arabia

India

Brazil

Russia

South Africa

Mexico

Turkey