Central banks

Their main task is currency regulation on a foreign market - namely, prevention of sharp jumps of national currencies rates, with the purpose of non-admission economic crisises, maintenance of export-import balance, etc. Central banks render direct influence on the exchange market. Their influence can be both to straight lines - in the form of currency intervention, and indirect - through regulation of money aggregates volume and interest rates. They cannot be carried to bulls or to bears since they can play both on increase, and on downturn proceeding from the specific targets facing to them at present. The Central Bank can act in Forex market alone, for rendering influence on national currency, or in coordination with other Central Banks for carrying out of joint currency politics in Forex market or for joint interventions. The central bank of the USA, Federal Reserve System (US Federal Reserve or in brief FED), the central bank of Germany - Bundesbank and the Great Britain - Bank of England possess the greatest influence on the world currency markets.
National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves, to stabilize the market. Milton Friedman argued that the best stabilization strategy would be for central banks to buy when the exchange rate is too low, and to sell when the rate is too high - that is, to trade for a profit. Nevertheless, central banks do not go bankrupt if they make large losses, like other traders would, and there is no convincing evidence that they do make a profit trading.
The mere expectation or rumor of central bank intervention might be enough to stabilize a currency, but aggressive intervention might be used several times each year in countries with a dirty float currency regime. Central banks do not always achieve their objectives, however. The combined resources of the market can easily overwhelm any central bank. Several scenarios of this nature were seen in the 1992-93 ERM collapse, and in more recent times in South East Asia.