Exchange requirements-, Financial Management

Assignment Help:

Exchange Requirements

To ensure money supply, some central banks require some or all of its foreign exchange receipts (generally from exports) be exchanged for the local currency. The rate that is used to purchase local currency may be market-based or arbitrarily fixed by the bank. This is generally applied in the countries where the currency is non-convertible or partially convertible.

The need for this tool is that the recipient of the foreign currency on conversion to local currency may easily dispose of these funds, may hold the funds with the central bank for some period or may be allowed to use these funds with certain restrictions. In simple words, the means to hold or use the foreign exchange may be otherwise limited.

Under this policy tool, money supply tends to increase when the central bank purchases the foreign currency by issuing/selling the local currency. This increase can be subsequently controlled through various issuances like selling bonds, foreign exchange interventions, etc.

Major Central Banks: Every country or a group of member states, for example European Union, shall have a central bank. Some of the major Central Banks are:

  • The US Federal Reserve
  • The Bank of England
  • The Reserve Bank of India (1935)
  • The Bank of Japan
  • The Deutsche Bundesbank
  • The Bank of Canada
  • The Reserve Bank of Australia
  • The European Central Bank.

 


Related Discussions:- Exchange requirements-

Ways and means advances, WAYS AND MEANS ADVANCES (WMAs) WMA is not a pe...

WAYS AND MEANS ADVANCES (WMAs) WMA is not a permanent source of financing government deficit. But, this is likely to provide greater autonomy to the RBI in conducting monetary

Methods of easing cash shortages, Q. Methods of easing cash shortages? ...

Q. Methods of easing cash shortages? There are several techniques which can potentially offset the effects of cash shortages. In the long-term nevertheless the adequacy of cash

Estimate the money in dollars have lost or gained, In January 2010 your fir...

In January 2010 your firm bought from an Italian firm goods payable in Euros worth EU2,000,000.  Suppose that at that time the exchange rate of the Euros was 1EU=$1.25.  Because th

Buy down loans, The buy down loan is similar to the PAM; however, it ...

The buy down loan is similar to the PAM; however, it is the seller of the property and not the buyer/borrower who places cash in a segregated account so that additional

Explain to tr, TR has recently been promoted to his first management positi...

TR has recently been promoted to his first management position. In the past, he very much enjoyed working as part of a team, but is having some difficulty in adapting to his new ro

Calculate average annual return, Q. Calculate Average Annual Return? An...

Q. Calculate Average Annual Return? An investor buys a bond in 1978 maturity in 1980 at Rs.900. It has a maturity value of 10 years and par value of Rs. 1000. It fetches RS.90

What interest rate is required to yield a balance, You invest $1,000 at an ...

You invest $1,000 at an annual interest rate of 5% compounded continuously. How much is your balance after 8.5 years?  How long will it take you to accrue a balance of $4,000? What

Forms of dividend, FORMS OF DIVIDEND Cash Dividend Many Companies...

FORMS OF DIVIDEND Cash Dividend Many Companies pay dividend in cash. Often cash dividend may be supplemented by a bonus issue (stock dividend).  When the company chooses

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd