Answer :

Under a managed floating rate system the central bank intervenes by entering the market as a bulk buyer or seller. When the floating rate is too high central bank starts selling foreign exchange from its reserve to bring the rate down. When rate is too low it starts buying foreign exchange so as to raise the rate. This is done in the interest of importers and exporters.

Thus the central bank intervention is an attempt to moderate exchange rate movement.

Rate this question :

How useful is this solution?
We strive to provide quality solutions. Please rate us to serve you better.
Try our Mini CourseMaster Important Topics in 7 DaysLearn from IITians, NITians, Doctors & Academic Experts
Dedicated counsellor for each student
24X7 Doubt Resolution
Daily Report Card
Detailed Performance Evaluation
view all courses

Primary deficit eEconomics - Board Papers

Foreign exchange Economics - Board Papers

(a) Define “TradeEconomics - Board Papers