The role of the Central Bank in maintaining the foreign exchange rates under different regimes is:
1. Fixed exchange rate system: A Central Bank actively uses its foreign currency reserves to maintain the officially determined exchange rate.
2. Floating exchange rate system:A Central Bank does not maintain any reserves of foreign currency as the market automatically adjusts to determine the market driven exchange rate
3. Managed Floating: A Central Bank enters the foreign exchange market to buy/sell foreign currency in order to control fluctuations and volatility in the market.
