Intervention in the foreign exchange market is the process of

Question

Quizplus · Accepted Answer

Intervention in the foreign exchange market is generally conducted by central banks, and typically involves a central bank buying or selling its own currency in order to influence its exchange rate. This can be done for a variety of reasons, such as to stabilize the currency or to prevent it from becoming too strong or too weak. It is generally done in the open market, i.e. the central bank buys or sells currencies through normal trading channels, and is not typically done by requiring commercial banks to trade at a set price level or by coordinating efforts between banks in different countries. Prohibiting transactions in one or more currencies would be a more drastic measure than foreign exchange intervention and is generally not done unless there are severe economic or political circumstances that require it.

Intervention in the Foreign Exchange Market Is the Process of