Upon completion of this program, participants will be able to:

• Explain the role of the currency composition in reserve management and its linkage to liabilities/mandate.
• Design an appropriate **currency benchmark** that balances risk, return, and intervention needs.
• Analyze and apply various currency hedging strategies (e.g., forward contracts, swaps).
• Describe the operational mechanics, timing, and execution of **Foreign Exchange Intervention (FXI)**.
• Manage the credit, settlement (PvP), and operational risks in FX trading and settlement.
• Understand the legal and regulatory framework for FX trading and market conduct (e.g., FX Global Code).
• Evaluate the effectiveness of FX intervention and the trade-offs between sterilized and unsterilized action.
• Formulate a comprehensive strategy for managing the currency risk of the overall balance sheet.

• Central Bank Foreign Exchange and Reserves Traders
• Currency Portfolio Managers and Risk Analysts
• Commercial Bank FX Trading and Treasury Strategists
• Middle Office Risk Management Professionals
• Legal and Compliance Officers for Trading Operations
• Academics and Researchers in International Finance

FX trading desk simulation, Case studies on historical exchange rate crises and intervention, Group project on designing a currency hedging strategy, Technical workshops on PvP risk mitigation (CLS), Discussions on the FX Global Code compliance, Performance attribution analysis.

Unit 1: Currency Policy and Benchmark Setting

• The role of reserves currency composition in mitigating external vulnerability.
• The concept of the "official currency basket" and its weighting methodology.
• Alignment of the currency mix with the country's trade, debt, and intervention currency needs.
• Policy on the management of gold and Special Drawing Rights (SDRs).

• Designing a passive vs. active currency benchmark.
• Criteria for inclusion: convertibility, liquidity, and stability of reserve currencies.
• Policy on **Tactical Currency Allocation (TCA)** deviations from the strategic benchmark.
• Performance attribution: measuring the return contribution of currency selection and TAA.

Unit 2: Currency Risk Management and Hedging

• Measuring currency risk (volatility) and its contribution to total portfolio risk.
• The concept of the "duration" or sensitivity to exchange rate changes.
• Analyzing the impact of cross-currency correlations on portfolio diversification.
• Stress testing the currency portfolio against severe exchange rate shocks.

• The use of FX forward contracts and currency swaps for hedging currency exposure.
• Determining the optimal hedging ratio and frequency of rebalancing.
• Policy on whether to hedge the strategic or the tactical part of the portfolio.
• Operational and collateral requirements for OTC derivatives.

Unit 3: Foreign Exchange Intervention Mechanics

• The decision-making process: authorizing, executing, and reviewing intervention trades.
• Techniques for minimizing **market impact** during large-scale intervention.
• Execution channels: direct trading, using primary dealers, and coordinated intervention.
• Risk management: setting limits on counterparty exposure and trade size.

• Managing **Payment vs. Payment (PvP)** or Herstatt risk in cross-currency settlement.
• The role of multilateral clearing services (e.g., CLS) in mitigating PvP risk.
• The process of internal reconciliation and external confirmation for FX trades.
• Compliance with the **FX Global Code** of conduct and best practice.

Unit 4: Policy Coordination and Governance

• Analyzing the balance sheet and monetary impact of sterilized and unsterilized intervention.
• Coordination with the monetary policy committee on the use of intervention.
• Communication policy: managing market expectations and signaling intervention intent.
• The role of the central bank in FX market surveillance and stability.