If the Fed decides to maintain a fixed euro/dollar exchange rate when they sell euros:

Question

Quizplus · Accepted Answer

When the Fed sells euros to maintain a fixed exchange rate, it decreases the supply of euros in the market, leading to an increase in the price of the euro relative to the dollar. This, in turn, leads to an increase in demand for dollars, which puts upward pressure on domestic interest rates as banks compete for the limited supply of dollars.

If the Fed Decides to Maintain a Fixed Euro/dollar Exchange