Foreign exchange operations of the Treasury and the Federal Reserve: February - April 1994

Federal Reserve Bank of New York - Quarterly Review, Spring, 1994

The Mexican peso, which opened the period at 3.1060, traded to a low of 3.3694 per dollar following the assassination but strengthened toward the end of the period to close at 3.2700 pesos per dollar.

Other operations

During the period, the Federal Reserve Bank of New York sold in the market all non-mark and non-yen foreign exchange reserve holdings of the Federal Reserve and the Exchange Stabilization Fund (ESF) of the U.S. Treasury. The Federal Reserve liquidated the equivalent of $703.8 million, while the ESF liquidated the equivalent of $64.4 million. Swiss francs represented $629.0 million of the amount liquidated by the Federal Reserve and $37.3 million of the amount liquidated by the Treasury. Swiss franc sales took place on the following days: February 15, February 22, March 1, March 8, April 5, April 12, and April 26. The remaining sales for the account of the Federal Reserve were as follows: $1.0 million of Belgian francs on February 25, $38.0 million of Dutch guilders on March 29, $0.3 million of Canadian dollars on March 29, $26.9 million of British pounds on April 12, and $8.7 million of French francs on April 12. The remaining sale for the account of the Treasury was a liquidation of $27.1 million of British pounds on April 26. It was decided to eliminate these currency holdings in light of the U.S. monetary authorities' practice in recent years of conducting intervention operations in German marks and Japanese yen. The sales were conducted in accordance with a schedule reflecting the maturity of investments in the individual currencies.

At the end of the period, the current values of the foreign exchange reserve holdings of the Federal Reserve and the U.S. Treasury were $23.0 billion and $21.0 billion, respectively. These holdings are invested in a variety of instruments that yield market-related rates of return and have a high degree of liquidity and credit quality. The Federal Reserve and the U.S. Treasury held, either directly or under repurchase agreements, $11.7 billion and $11.3 billion, respectively, in foreign government securities.

Table 1
Foroign Exchange Holdings of U.S. Monetary
Authorities at Pediod End
Millions of Dollars
                        Federal         U.S. Treasury Exchange
                        Reserve           Stabilization Fund
German marks            13,615.8              8,413.7
Japanese yen             9,375.3             12,600.3
                         22,991.1             21,014.0

This report, presented by Peter R. Fisher, Senior Vice President, Federal Reserve Bank of New York, and Manager for Foreign Operations, System Open Market Account, describes the foreign exchange operations of the U.S. Department of Treasury and the Federal Reserve System for the period from February 1994 through April 1994. Ladan Archin was primarily responsible for preparation of this report. (1) The dollar's movements on a trade-weighted basis are measured using an index develope 3 by staff at the Board of Governors of the Federal Reserve System.