Foreign exchange traders go into the market to support

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Reference no: EM13770720

When the Bank of Canada's foreign exchange traders go into the market to support the Canadian dollar, they trade US dollars from Canada's reserves for Canadian dollars that other people are trying to sell. The Canadian cash resulting from this transaction goes into the government's ordinary account, reducing the finance minister's need to borrow from other sources to cover the deficit. Since the beginning of the fiscal year, about 2 billion in Canadian funds has appeared from this source.

a. In the absence of the intervention, was the Canadian dollar trying to rise and fall during the period referred to in this clipping?

b. What are the "other sources" from which the finance minister would ordinarily borrow?

c. If this is such a good way of supplementing tax revenues, why not do ore of it more often?

Reference no: EM13770720

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