Market Balances

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Market Balances

What is Market Balances?

The supply and demand for a country’s currency in the foreign exchange market at a specific exchange rate are referred to as the market balance.

If the economy is out of balance and the exchange rate must be maintained, the monetary authorities will need to act to restore balance by either buying their own currency with foreign exchange if there is an excess supply of the domestic currency or selling it for foreign exchange if there is an excess demand for the domestic currency.

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