If a central bank buys foreign currency to hold down the exchange rate of the domestic currency, it creates more domestic money.
Holders of precious metals or other major tradable (fungible) assets worldwide need to monitor the foreign exchange rate of the currency in which their asset is held.
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The central bank had tried selling the currency at that level on the interbank market for foreign currency, which is how its exchange rate is normally determined, but gave up when no one would buy it.
The country's current foreign-exchange system, which involves a fixed "official" exchange rate that makes the currency, the kyat, more than 100 times as valuable against the dollar as the black-market rate, is so confusing that many foreign companies have refused to re-enter the country even if Western leaders ease sanctions against Myanmar, the country also known as Burma, as expected later this year.
Under a currency board arrangement, the central bank guarantees the redemption of all notes in circulation at a set exchange rate to the dollar or another foreign currency or basket of currencies.
The government has abolished jail terms for those caught dealing in foreign currency, offered extra incentives for private investment and brought the official exchange rate closer to the black-market one.
On a constant-exchange-rate basis excluding the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales rose 6 percent and same store sales increased 4 percent.
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If, as a result of capital inflows, there is an excess supply of foreign currency, the central bank must buy it and sell yuan to keep the exchange rate stable.
On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales rose 5 percent, for the period ended Jan. 31, due to growth in all regions and comparable store sales equaled the prior year.
On a constant-exchange-rate basis, which excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales and comparable store sales increased 16 percent and 15 percent, respectively, the New York-based luxury jewelry retailer said.
The trade surplus leads to large inflows of foreign currency, which is bought up by the central bank in order to hold down the exchange rate.
By devaluing a currency in a floating exchange rate environment, the result is that trade booms and foreign reserves balloon.
And in sharp contrast to Asia, over half of New Zealand's foreign debt is denominated in its own currency, reducing the potential impact of a fall in the exchange rate.
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