Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/336482 
Year of Publication: 
2025
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 456
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
We examine how central bank foreign exchange (FX) operations affect nominal exchange rates by exploiting two large operations by Sveriges Riksbank: foreign currency purchases during 2021-2022 and domestic Swedish krona (SEK) purchases-that is, FX forward sales- during 2023-2024. Using daily data and local projections, we identify unanticipated operation shocks to the SEK against the euro (EUR) and the U.S. dollar (USD). On average, we observe sign consistency-depreciation during FX purchases and appreciation during SEK purchases. Three main results emerge: (i) effects unfold gradually but fade quickly, becoming statistically insignificant after about ten trading days; (ii) they are regimedependent, with FX purchases inducing larger depreciations and domestic currency purchase yielding smaller, delayed appreciations; and (iii) FX purchases generate long-run (11-60 days) currency-specific effects, with a stronger SEK depreciation against the EUR relative to the USD. However, results are more uniform across currencies in the short run (1-10 days) and throughout the domestic currency purchase period.
Document Type: 
Working Paper

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