Bank Central

Bank, national central banks play an important role in the foreign exchange market. You try to the money supply, inflation, interest rates and often have formal targets or unauthorized control their exchange rates. You can often exploit considerable foreign exchange reserves to stabilize the market. Milton Friedman argued that would be the best strategy for the stabilization of central banks to buy when the exchange rate is too low, and sell when the rate was too high, so for a profit of more accurate information based trading. However, the effectiveness of central bank "stabilizing speculation" doubtful because central banks do not go bankrupt if they make large losses like other traders would and there is no convincing evidence that they are not in favor of the trade.

Only a wish or a rumor of central bank intervention might be enough to stabilize the currency, but aggressive intervention can be used several times each year in countries with a dirty floating currency regime. The central bank does not always achieve their goals. Sources combined market could easily beat any central bank. Several scenarios of this kind are in the 1992-93 ERM collapse, and most recently in Southeast Asia.