BANKING AFFAIRS

Detailed explanation-1: -Central banks will often buy foreign currency and sell local currency if the local currency appreciates to a level that renders domestic exports more expensive to foreign nations. Therefore, central banks purposely alter the exchange rate to benefit the local economy.

Detailed explanation-2: -Central banks, which represent their nation’s government, are extremely important players in the forex market. Open market operations and interest rate policies of central banks influence currency rates to a very large extent. A central bank is responsible for fixing the price of its native currency on forex.

Detailed explanation-3: -Central banks manage currency by issuing new currency, setting interest rates, and managing foreign currency reserves. Monetary authorities also manage currencies on the open market to weaken or strengthen the exchange rate if the market price rises or falls too rapidly.

Detailed explanation-4: -Macroeconomic statistics, such as inflation, have the greatest impact on forex markets. Stock, bond, commodity, and other capital markets also have a strong influence on exchange rates. International trade numbers, such as trade deficits and surpluses, play a vital role in forex markets.

Detailed explanation-5: -Current international exchange rates are determined by a managed floating exchange rate. A managed floating exchange rate means that each currency’s value is affected by the economic actions of its government or central bank.