How to Stabilize the Currency Exchange Rate

In 2015 many countries had to deal with the weakening of their currencies Issues regarding exchange rate management by the Central Banks have again become the focal point of heated debate For example the Russian Ruble exchange rate has been fluctuating hugely The problem now is not so much the Ruble s weakness as instability of its exchange rate volatility As a matter of fact any country s Central Bank has two methods of stabilizing the exchange rate available to it Firstly adaptive approach to stabilization may be implemented In this case the Central Bank as it were adjusts itself to the tendencies unfolding in the market without being active in trying to influence them Secondly the Central Bank may use an active way of stabilizing the exchange rate In such a case it needs to influence the exchange rate without resorting to foreign exchange interventions Both methods the adaptive one and the active one do not require gold or foreign exchange reserves to be spent It is even the other way round the reserves become replenished while economy gets an impetus for growth