To support the dollar, the United States, through the New York Fed, buys dollars and sells foreign currency in the currency exchange markets. Japan is often relied upon to buy US Dollars on various currency exchange markets.
Central banks use reserves in 2 ways: 1) They acquire (buy) foreign currency, often US Dollars, with their currency to keep their currency relatively weak and so enhance exports. This is what the US is acusing China of doing. 2) They use their foreign reserves to buy their own currency and support if from falling in value. This is what happened, with limited temporary success and eventual failure in Asian currencies, such as the Thai Baht, in 1997.
The demand for a foreign currency is based on how many buyers are in the market. Generally speaking, when a corporation seeks to buy products from another company in a foreign country, that corporation will need to make the purchase in the currency of the aforementioned company. Usually their bank will enter the foreign exchange market on behalf of their client and buy the currency required. The greater the demand for that currency, the higher its price.
The interest rate determines how much foreign countries want to invest in the American dollar. If the interest rate is high, foreign firms will want to invest more in America because a high interest rate means a higher rate of return for investment in America. If the interest rate is low, foreign firms will not want to invest in America because their rate of return will be lower. If foreign firms will want to invest more in America it will need to convert its money into the dollar, thus the demand for dollars will increase. By increasing the demand for the dollar it will appreciate and grow stronger relative to other currencies, making it more expensive to buy. By making the dollar stronger imports will increase and exports will decrease. This is because the American dollar will buy more and therefore it will be cheaper for the American people to buy foreign currency or goods. It will decrease exports because it will be more expensive for holders of foreign currency to buy American goods.
Why central banks buy either their currency or the currency of another nation in the effort to countrol exchange rates
To support the dollar, the United States, through the New York Fed, buys dollars and sells foreign currency in the currency exchange markets. Japan is often relied upon to buy US Dollars on various currency exchange markets.
Central banks use reserves in 2 ways: 1) They acquire (buy) foreign currency, often US Dollars, with their currency to keep their currency relatively weak and so enhance exports. This is what the US is acusing China of doing. 2) They use their foreign reserves to buy their own currency and support if from falling in value. This is what happened, with limited temporary success and eventual failure in Asian currencies, such as the Thai Baht, in 1997.
The only way for the United States to support the price of the dollar is to buy up excess dollars with foreign reserves--in our case, with Japanese yen.
To buy foreign currency for investment purposes you can contact a Exchange Trade Funds broker. They are brokers that specialize in foreign currency and can help you choose the right currencies.
The demand for a foreign currency is based on how many buyers are in the market. Generally speaking, when a corporation seeks to buy products from another company in a foreign country, that corporation will need to make the purchase in the currency of the aforementioned company. Usually their bank will enter the foreign exchange market on behalf of their client and buy the currency required. The greater the demand for that currency, the higher its price.
you buy them with currency, as you do foreign products as well. if you neglected to exchange the product for currency, you are a thief
The interest rate determines how much foreign countries want to invest in the American dollar. If the interest rate is high, foreign firms will want to invest more in America because a high interest rate means a higher rate of return for investment in America. If the interest rate is low, foreign firms will not want to invest in America because their rate of return will be lower. If foreign firms will want to invest more in America it will need to convert its money into the dollar, thus the demand for dollars will increase. By increasing the demand for the dollar it will appreciate and grow stronger relative to other currencies, making it more expensive to buy. By making the dollar stronger imports will increase and exports will decrease. This is because the American dollar will buy more and therefore it will be cheaper for the American people to buy foreign currency or goods. It will decrease exports because it will be more expensive for holders of foreign currency to buy American goods.
Why central banks buy either their currency or the currency of another nation in the effort to countrol exchange rates
Foreign Exchange (FX) rate
Foreign currency exchanges exist for the purpose of buying and selling world currencies. Banks, brokers, dealers, individual companies and central banks all participate in these markets. The main purpose is to gain a profit by buying a particular currency low and sell it at a higher price. Companies that do business overseas for example, will usually need Yen, to buy products from Japanese companies. Central banks buy & sell foreign currencies to influence the prices of currencies. Individuals can buy a currency for the use of the Euro-dollar should they chose to be in Europe for business or vacations. The major players in the foreign exchange markets, however, are large banks and large financial institutions.
A converter for foreign currency exchange trading can be found anywhere on the internet. There are lots of currency calculators you can buy online off of many electronic websites.
Many major banks and financial companies such as Wells Fargo, Citibank, and American Express allow customers to purchase foreign currency online. One can also go to websites like Travelex, Foreign Money, and eZforex that specialize in the sale of foreign currency.