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Since this form of FX intervention does not impact cash reserves and is not reflected in a change of underlying spot securities, China could intervene for an extended period and not show it, which is precisely what happened in October and November.Standard central-bank intervention to support a currency generally involves selling dollars and buying the home tender. In this case, China's large state banks borrowed dollars in the swap market, sold the U.S. currency in the cash spot market and used forward contracts with the central bank to hedge those positions.
"If you can intervene without actually diminishing your reserves, it's somehow viewed as better," said Steven Englander, global head of Group-of-10 foreign exchange-strategy in New York at Citigroup Inc. Such central-bank activity "may not look quite as dramatic as the sale of reserves, and they may prefer that optically," he said.
Comment: Clearly, there is a severe, systemic problem with the way we handle law enforcement in this country.