Central banks use foreign currency reserves to stabilise or influence their national currency in the foreign exchange (FX) market.
Why Intervene?
To prevent excessive currency depreciation/appreciation.
To control inflation by managing exchange rates.
To maintain export competitiveness.
Example: The People’s Bank of China (PBOC) intervenes in FX markets to stabilise the Chinese Yuan (CNY).
???? Reference: IMF Guidelines on Currency Intervention, CISI Wealth & Investment Management.
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