If the demand for foreign exchange increases then the central bank would have to sell foreign exchange to keep the value of the currency fixed.

Question

Quizplus · Accepted Answer

When the demand for foreign exchange increases, it puts downward pressure on the domestic currency's value. To maintain a fixed exchange rate, the central bank sells foreign exchange reserves to buy back its own currency, thereby supporting its value and keeping the exchange rate stable.

If the Demand for Foreign Exchange Increases Then the Central