One puzzling feature of recent empirical studies of the effects of monetary policy changes on exchange rates is the result that the exchange rate does not adjust immediately to the policy shock. Instead, these studies find that it can take as long as two years for the exchange rate to fully...

We re-examine the relationships among Federal Reserve monetary-policy actions, U.S. interventions in currency markets, and exchange rates using an alternative measure of monetary policy actions, the Federal Reserve's federal funds rate target. We find that exchange rates generally respond...