RDP 2004-06: Profitability of Reserve Bank Foreign Exchange Operations: Twenty Years After the Float 6. Conclusion

The exchange rate regime in place in Australia over the past two decades can be best characterised as an independent float with occasional intervention by the RBA. Our study has found that the RBA has earned significant profits from its intervention over the past two decades, indicating that its foreign exchange operations have been to purchase the local currency when it is low and sell it when it is high, thereby exerting a stabilising influence. This conclusion is strengthened by the finding that the RBA's foreign exchange operations have also been profitable in each of the three identifiable cycles in the exchange rate.