Saturday, July 16, 2011
Who control the exchange rate policy?
Only the Euro and US dollar are determined by demand and supply in the money market. But the FED or central bank can influence the market by changing monetary policy,including fund or policy rate. The rest is controlled by the central bank.The Yen is mostly determined by the free market.But the central bank will intervene sometimes. And the central bank is working under the finance minister.The Yuan is determined solely by the central bank,by pegging to the US dollar with capital control.The Thai baht is determined by the central bank using basket of currency.It is called a managed exchange rate with capital control.Canada is using a fixation with floating as an exchange rate policy. But,the bank of Canada has no specific target value and has not intervened in foreign exchange market since 1998. Mexico has enter a floating rate policy since 1994. It has used the interest rate targeting to intervene the exchange rate.
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