Definition of 'Hot Money'1. Money that flows regularly between financial markets as investors attempt to ensure they get the highest short-term interest rates possible. Hot money will flow from low interest rate yielding countries into higher interest rates countries by investors looking to make the highest return. These financial transfers could affect the exchange rate if the sum is high enough and can therefore impact the balance of payments.

2. Stolen money that is marked so as as to be traceable. | | Investopedia explains 'Hot Money'1. Banks usually attract "hot money" by offering relatively short-term certificates of deposit that have above-average interest rates. As soon as the institution reduces interest rates or another institution offers higher rates, investors with "hot money" withdraw their funds and move them to another institution with higher rates.

2. Hot money might have been involved in a robbery and tracked through dye marks on each bill or through recorded serial numbers. |

Definition of 'Foreign Exchange Intervention'A monetary policy tool in which a central bank takes an active participatory role in influencing the monetary funds transfer rate of the national currency. Central banks, especially those in developing countries, intervene in the foreign exchange market in order to build reserves, stabilize the exchange rate and to correct misalignments. The success of foreign exchange intervention depends on how the central bank sterilizes the impact of its interventions, as well as general macroeconomic policies set by the government. | | Investopedia explains 'Foreign Exchange Intervention'Two difficulties that central banks face is determining the timing and amount of intervention, as this is often a judgment call rather than a cold, hard fact. The amount of reserves, the type of economic trouble facing the country and the ever