how can monetary policy maintain a fixed foreign exchange?
107474
1. Maintaining a balance between export and import of products & services. \n2. Controlling misuse of foreignex.\n3. Ensuring a proportionate increamental GDP growth every year.\n4. By formulating & applying a stringent money laundering act.\n5. By encouraging exports through incentives to exporters.\n6. By Discouraging imports of nonessentials through imposing import duties.
323169
http://www.federalreserve.gov/monetarypolicy/reservereq.htm
578029
There are spot exchange rates, what someone exchanges at the moment (these actually have little effect)\nThere are future exchange rates which is included in a contract my companies of different countries.  Such as British Company is selling an asset to American Company for 100,000 Pounds due in 30 days.  The equivalent price of the asset in dollars to the 100,000 pounds is the exchange rate.  These types of exchange rates typically make up the rate.\n\nThese two things make up the current exchange rate showing its intense variablity.\n\nTrying to make a model to determine exchange rates has led to many flaws using prices, real and nominal rates, and inflation in order to determine them.
648566
Except for a few states, such as West Virginia, there is no regulation of the FOREX spot market in United States.  The reason is that money is a commodity.  You could go to a coin dealer and buy 1 Euro for $10, $0.80, or $1.33 or any price you could agree upon.  You could also do this with a friend or anyone else.  Since the FOREX sites are captive sites, you are actually only trading with the FOREX site as a dealer of money.  They can use the real spot rates, but if they are losing money on a position, they can simply substitute their own prices.  There is no law that says they cannot because they cannot compel you to trade with them.  Of course, if you are on margin with them, that could mean they could force a margin call and force you to liquidate at adverse prices.  You need to physically go to the United Kingdom or be present in the handful of domestic locations that regulate the practice and engage in your operations within the physical presence of that jurisdiction.  Otherwise, while they might be "legit," in the legal sense, they do not need to act in a manner which an independent observer would consider fair.  What is money worth, or better what is foreign money worth?  The answer is what a willing buyer will bear.  If the only willing buyer is the FOREX firm, then you are in a world of hurt.\n\nOnly those with very very very large portfolios can trade with money center institutions.  It is important to understand that money trades occur where $1 million is the equivalent of to the average person of a penny.\n\nA better bet is to trade foreign short term debt on a regular brokerage firm.  Not only do you get the foreign exposure, but you get a little interest on the money.
165677
In a recessionary type environment, expansionary fiscal policy can promote employment by increasing demand for goods and services. This occurs when a rise in consumption happens from things like a lowering of taxes giving consumers more free money to spend.\nThe government will borrow more money which will make interest rates rise. This will attract foreign investors which in turn will bring the value of the dollar up. If the dollar is worth more, then imports will be cheaper (while exports will be more expensive to the recipients).
5711
The Federal Reserve's roles in conducting monetary policy, supervising banks, and providing payment services to depository institutions help it maintain the stability of the financial system.\n\nUsing the monetary policy tools at its disposal, the Federal Reserve can promote an environment of price stability and reasonably damped fluctuations in overall economic activity that helps foster the health and stability of financial institutions and markets. The Federal Reserve also helps foster financial stability through the supervision and regulation of several types of banking organizations to ensure their safety and soundness. In addition, the Federal Reserve operates certain key payment mechanisms and oversees the operation of the payment system more generally, with the goal of strengthening and stabilizing the system.\n\nThe Federal Reserve engages in all these activities on a routine basis, but the stabilization activities of a central bank are especially evident and critical during periods of financial stress, such as those that occurred following the stock market decline of October 1987, the international debt crisis in the fall of 1998, and the terrorist attacks in September 2001. In these instances, the Federal Reserve promoted financial system stability by providing ample liquidity (balances at the Federal Reserve) through large open market purchases of securities (using short-term repurchase agreements) and by extending discount window loans to depository institutions. In unusual and exigent circumstances, the Federal Reserve has the authority to lend to individuals, partnerships, and corporations, but it has never done so.
441013
There would be two problems - getting readers that count the foreign currency, and getting up-to-date conversion rates sent to it, so that you con't get cheated by currency rates changing.\n\nYou'd have to set it up so that it either gets an update once per day, say, or like an ATM, it would 'phone home' for every transaction to verify rates.  A daily update would be more efficient.\n\nAnother problem would be displaying the prices.  You'd need a touch-screen with a menu system, first showing a menu of currencies accepted, and then the items for sale (so that you can display the menu in the currency of choice)  If the item menu displays the prices in several different currencies at once, it would be too cumbersome.\n\nHer's another option - say you are returning from Europe with a few Euros here, a few pounds there, some Rials, and a few Rands.  It would be cool to select an item and just start feeding in all those different currencies until the item is paid for, and it spits out change in Dollars or something.  This would make displaying prices difficult, since you are using several currencies to pay for an item, but this would be a valuable thing to have in airports around the world.\n\nInteresting idea.
125306
Most banks in other than very rural areas are able to do this, but it may take them some time, if they don't do it regularly.  It may depend on which currency is being exchanged, too.
794497
they set interest rates and control money supply. This is to keep inflation under control. They control money supply by selling and buying bonds, setting interest rates, they just change numbers...
367202
First the Fed doesn't print money.  That's done by the Treasurey.  And what the hell is the "golf" standard?\nAnyway.  There a three ways the Fed can control the money supply: \n1)Open Market Operations\n2)Discount Window(rate)\n3)Legal Reserve Requirement
442337
The short of it is that the countries tried to keep exchange rates relatively stable by have a currency peg based on gold.  They were allowed a little bit of room (1%) but beyond that the countries had to trade currency to get back within the range.\n\nThe long of it is here.\nhttp://www.polsci.ucsb.edu/faculty/cohen/inpress/bretton.html\n\nOr at the Wiki.
302996
The money is printed and managed by the Fedral Reserve and inflation determines the value of the dollar.
817321
Exchange rates are set via two different ways: fixed rate and floating.  \n\nFixed rates are set at... errr... a fixed rate.  Usually through a policy called dollarization.  This is where every currency unit is backed by an equal amount of US dollars in reserves.  For example, if a Smolgarian Ziggli (I made that up) is fixed at 4.0 Ziggli to the US dollar and the Smolgarian Central Bank has printed 400 billion Ziggli, they need to have 100 billion US dollars to dollarize.  So if somebody buys/sells a ziggli for dollars, the central bank can accomodate the sale with no impact.\n\nThe floating exchange rate is much more difficult.  The exchange rate is set by a triangle arbitrage called the "interest rate arbitrage theory".  The monetary system is all intertwined through three legs.\n\nLeg 1.  Current Exchange rate.  Currently there are 116 Japanese Yen to the dollar (around that, but just humor me for now if I'm off a bit). \n\nLeg 2.  There are interest rates.  You can deposit the Yen in Japanese accounts for essentially zero interest (due to extremely low interest rates in Japan - which actually went negative for a while, but I digress). For argument's sake, let's say 0%.  In the US the interest rates for a 1 year CD are about 5%. \n\nLeg 3. Currency futures.  Currency futures perfectly align what the future exchange rate should be.  Otherwise, there is an arbitrage opportunity.  For example, if I borrow 116m Yen, turn it into US$ 1m dollars and deposit it at 5%, wait one year, then exchange it back to yen to pay off the 116m yen debt. If the Japanese yen currency markets did not factor in a 5% depreciation of the yen, you would have an arbitrage opportunity.  That is, you could borrow an infinite amount of money in Japan, deposit it in the US and make an infinite amount of profit.  \n\nI live in Singapore and the same thing applies to me. Local CDs earn about 2-3% compared to my US dollars which earn about 5%.  Why don't I shift all my money to the US? Because the Singapore dollar is expected to strengthen against the US dollar about 2-3% per year. Hence, I've got no reason to shift my money out of Singapore. \n\nNow, the currency futures market is mostly reactive to the interest rate market - which means most of the changes in interest rate expectations (disparity in borrow/lend rates, changing interest rate curves and change in local inflation) mostly affects the exchange rate.\n\nThe above is a function part of exchange rate dynamics.  But why 4.0 Ziggli instead of 4,000?  The PPP theory (as previously described) does partially explain this.  However, it breaks down for countries that are dollarized (which used to be a huge amount of countries after the 1997 Asian currency crisis and the Argentinian financial meltdown in the 1990s).
222954
I think that's because floating exchange rate system has an advantage that it can reflect supply and demand of market derectly to the exchange rate between currencies.  And you don't have to spend your foreign reserves.\n\nIn fixed rate sysytem, governments are required to use their foreign reserves to keep exchange rate at the fixed value.  But sometimes they used up all reserves and no longer are able to maintain fixed rate system.\n\nIn 1998, Thailand and Indonesia floated their currencies just because they exhausted all their reserves.
74344
They are deflationary to combat inflation
863926
I'm willing to keep my money and earn interest on it. Call it sensible!
377248
Tourists comprise a very small amount of the Foreign Exchange market.  Shifts in tourist patterns have much less effect on currency prices than demand by institutional traders.  Interest rates, fiscal deficits, trade deficits, and the strength of the economy that issues the currency tend to be the factors affect currency values most (for those currencies that are allowed to float)