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Exchange Equalization Account (Unilateral Methods)

>> Sunday, September 27, 2009

Exchange Equalization account is the device adopted for smoothing out temporary or short term fluctuation in the rate of exchange as a result of any abnormal movement of capital. This type of exchange control was first adopted by England in 1932. France and U.S.A. followed suit and set up Exchange Equalization Account in 1936. This fund, i.e., Exchange Equalization Account is utilized for offsetting inward or outward movements of hot money or refugee capital. It is never intended that resources of the Exchange Equalization Account should be utilized for affecting the normal rate of exchange. The object of the fund is to iron out the abnormal fluctuation in the rates of exchange by buying and selling of foreign currencies.

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