However, where capital flows are controlled or the country is not yet well integrated into the global capital markets, and provided policymakers are willing to intervene on a sufficiently large scale, the portfolio balance channel can operate to enable the country to have a sustained effect on the exchange rate, as the Chinese and the Russian cases illustrate. Interventions are not costless.
At year-end 2003, thirty-five of the fifty largest U.S. bank holding companies that we closely monitor each quarter were taking this approach, a notable increase from the year before. 4  BIS Review 13/2004  Many nonbank firms are doing so as well, and we should expect to see many more companies do so in periods ahead.