A central bank is a public institution that acts as a nation’s monetary authority. Central banks have a range of responsibilities, including the control of the money supply, the setting of interest rates and the formation of monetary policy. Central banks also issue economic reports that show the health of a nation’s economy.
Central banks are both a source of information in the currency market and a major player. Although actions vary by nation and the character of their central banks, many central banks will intervene in the currency markets when they see the trends there as damaging to their economies. For example, the Bank of Japan uses several levels of intervention, from merely calling for the rates on USD/JPY (signalling that they are watching it) to buying up foreign currencies to create demand and push the yen down in value.
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