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There are a handful of methods that can solve a currency crisis, including implementing floating exchange rates, moving away from pegged rates, monetary policy that allows for trading with the market, government policies to attract foreign investment, and the country purchasing its own currency.

It does so by controlling the reserve ratios, open market operations, and discount rates. By adjusting these factors, RBI ensures that the money supply in the economy is neither too high nor too low, which can lead to inflation or deflation.

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To strengthen the exchange rate, the central bank simply raises its policy interest rate. As investors in search of higher returns increase their demand for the currency, the exchange rate appreciates. By lowering interest rates, the central bank can weaken the exchange rate.

It does so by controlling the reserve ratios, open market operations, and discount rates. By adjusting these factors, RBI ensures that the money supply in the economy is neither too high nor too low, which can lead to inflation or deflation.

How much demand there is in relation to the supply of a currency will determine that currency's value in relation to another currency. For example, if the demand for U.S. dollars by Europeans increases, the supply-demand relationship will cause an increase in the price of the U.S. dollar in relation to the euro.

Central banks conduct monetary policy by adjusting the supply of money, usually through buying or selling securities in the open market. Open market operations affect short-term interest rates, which in turn influence longer-term rates and economic activity.