The International Monetary Fund (IMF)'s East African Regional Technical Assistance Center (East AFRITAC) held a workshop on central bank foreign exchange market operations, January 21-24, 2014, Nairobi, Kenya. Twenty five officials from central banks' financial market operations and research departments, representing seven countries (Eritrea, Ethiopia, Kenya, Malawi, Rwanda, Tanzania and Uganda) participated.
In his opening remarks, East AFRITAC's Monetary and Operations Advisor, Elias Kasozi, highlighted the importance of an appropriate exchange rate policy framework, professionalism and skills on the part of staff that interface with the market, internal organizational arrangements for strategic and tactical decision making and the role of information and telecommunications technology in foreign exchange market operations. He emphasized that central bank operations ought to be conducted in a manner which is consistent with and supportive of the broader monetary and exchange rate policy objectives as well as foreign exchange market development.
The workshop provided participants with a forum to share experience on a wide range of issues including timing of intervention, market communication the choice of market intervention instruments. The finite resources available for intervention (foreign exchange reserves) and incorporation of central bank foreign exchange intervention in the overall conduct of monetary policy were singled out as major challenges. Experts delivered presentations on a number of topics, including the evolution of foreign exchange regimes, the foreign exchange market and its regulation and decision making arrangements. Participants showed particular interest in the subjects of foreign exchange market intervention techniques and transmission channels.
Officials from Thompson Reuters made presentations and demonstrations of how technology can be leveraged to support price discovery and how market participants forecast exchange rate movements using technical and fundamental analysis.
Participants expressed the view that regular workshops on this topic would play an important role in strengthening foreign exchange market operations in their respective institutions through peer-to-peer learning and interaction with experts in the subject. They observed that the exchange of experiences would be highly valuable during the ongoing move to monetary union and the transition from targeting reserve money to use of interest rates as a monetary policy tool.
In his closing remarks, Mr. Stephen Mulema, Director Financial Markets, Bank of Uganda thanked East AFRITAC for the opportunity to focus and reflect on this important aspect of foreign exchange market operations and implications for monetary policy implementation.