Question : What is the term used to describe the rate at which a central bank buys or sells its own currency in the foreign exchange market?
Option 1: Spot exchange rate
Option 2: Nominal exchange rate
Option 3: Intervention exchange rate
Option 4: Forward exchange rate
Answer (1)
20th Jan, 2024
Correct Answer: Intervention exchange rate
Solution : The correct answer is c) Intervention exchange rate
This rate is set by the central bank and is used as a tool to influence the value of the currency in the market. By buying or selling its own currency, the central bank can affect the supply and demand dynamics, and thus influence the exchange rate.
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