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Under the exchange rate targeting regime, the central bank tries to ensure nominal exchange rate stability vis-a-vis the currency of a so-called anchor country via interest rate changes and direct foreign exchange interventions, thereby "importing" price stability from the country.

In a fixed exchange rate system, a country's central bank typically uses an open market mechanism and is committed at all times to buy and sell its currency at a fixed price in order to maintain its pegged ratio and, hence, the stable value of its currency in relation to the reference to which it is pegged.

A fixed or pegged rate is determined by the government through its central bank. The rate is set against another major world currency (such as the U.S. dollar, euro, or yen). To maintain its exchange rate, the government will buy and sell its own currency against the currency to which it is pegged.

For example, Australia, the United Kingdom, Japan, and the United States have free-floating currencies. In a managed-floating system, the central monetary authority of countries influences the movement of the exchange rate through active intervention in the forex market with no preannounced path for the exchange rate.

Flexible exchange rates have the advantage that they allow a country to pursue an independent monetary policy, rather than have its own monetary policy set by an anchor currency country.

To maintain a desired exchange rate, the central bank during a time of private sector net demand for the foreign currency, sells foreign currency from its reserves and buys back the domestic money. This creates an artificial demand for the domestic money, which increases its exchange rate value.

Banks, credit unions, and online currency exchange bureaus and converters provide convenient and often inexpensive currency exchange services. Also, your own bank's overseas ATM or a foreign bank's are ways to get local currency with a credit card or ATM card once you have arrived.

Typically, a government maintains a fixed exchange rate by either buying or selling its own currency on the open market.