Foreign Exchange Market
- The foreign currency holdings of the United States Federal Reserve System
- When there is a balance of payments surplus the Fed accumulates foreign currency and debits the balance of payments
- when there is a balance of payments deficit the fed depleted it's reserves of foreign currency and credits the balance payments
- The official Reserves zero out the balance of payments
- When there is a balance of payments surplus the Fed accumulates foreign currency and debits the balance of payments
- when there is a balance of payments deficit the fed depleted it's reserves of foreign currency and credits the balance payments
- The official Reserves zero out the balance of payments
Active v. Passive official reserves
- The United States is passive in its use of official Reserves. It's doesn't not seek it manipulate the dollar exchange rate
- The people's republic of China is active in it's use of official reserves. It's actively buys and sells dollars in order to maintain a steady exchange rate with the United States.
- The United States is passive in its use of official Reserves. It's doesn't not seek it manipulate the dollar exchange rate
- The people's republic of China is active in it's use of official reserves. It's actively buys and sells dollars in order to maintain a steady exchange rate with the United States.
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