How can the government affect the exchange rate?

Keep in mind that increasing your purchases of a product tends to lead to a higherprice in that product, while increasing your selling of a product tends to lead to a lowerprice in that product.if the dollar is rising and the government wants to put downward pressure on the risingprice, the government can sell canadian dollars in the open market. the increase inthe supply of canadian dollar leads to a drop in the price of the canadian dollar. if thedollar is falling in price and the government wanted to halt that downward price move,the government can buy canadian dollars in the open market. large purchases of thedollar tend to move the price of the dollar higher.