CENTRAL BANK
In all countries central banks have been charged with the responsibility of maintaining the external value of the domestic currency. Generally this is achieved by the intervention of the bank. Apart from this central banks deal in the foreign exchange market for the following purposes:
1) Exchange rate management: It is achieved by the intervention though sometimes banks have to maintain external rate of the domestic currency at a level or in a band so fixed.
2) Reserve management: Central bank of the country is mainly concerned with the investment of countries foreign exchange reserve in a stable proportion in range of currencies and in a range of assets in each currency. For this bank has to involve certain amount of switching between currencies.
In all countries central banks have been charged with the responsibility of maintaining the external value of the domestic currency. Generally this is achieved by the intervention of the bank. Apart from this central banks deal in the foreign exchange market for the following purposes:
1) Exchange rate management: It is achieved by the intervention though sometimes banks have to maintain external rate of the domestic currency at a level or in a band so fixed.
2) Reserve management: Central bank of the country is mainly concerned with the investment of countries foreign exchange reserve in a stable proportion in range of currencies and in a range of assets in each currency. For this bank has to involve certain amount of switching between currencies.