Forget efficient markets, in Fixed Income & FX Carry Is King.
So it should be no surprise that carry has typically played a key role in the profitability of RBA FX interventions. The Bank’s most recent assessment of FX intervention is RDP 2004-06 — which uses Friedman’s profitability test to assess the RBA’s three pre-GFC interventions in the FX market. The fourth was in 2008/9, and also realised handsome profts, as you can see from the Valuation gains and losses figure in this post.
In all cases, the RBA intervened to tighten monetary conditions — selling foreign reserves to buy AUDs. Consistent with this, they were also tightening monetary policy, so their actions to reduce the supply of AUDs were consistent with their interest rate and inflation objectives.
A consequence of this tightening campaign was that domestic interest rates were higher than global interest rates. As a result, the RBA made a profit on their portfolio switch (selling lower yielding assets to redeem higher yielding central bank liabilities). Thus, the Bank booked a gain just from holding their intervention portfolio – a profit that’s a handy buffer against the vicissitudes of the FX market.