But observers focusing on the change in the balance between short and long positions in the market have pointed to the possibility that futures prices – determined on a market in which buyers are increasingly motivated by a search for financial yield rather than the incentive to hedge – might have been contributing in certain market phases to movements in the spot price.
It became necessary to draw down reserves to finance the shortfall and maintain orderly conditions in the foreign exchange market. This led to a corresponding contraction in the base (reserve) money.