To hold an exchange rate fixed or constant, the central bank must be willing to trade
currencies at the fixed exchange rate with those who trade in the foreign exchange
market. To relieve upward pressure on the exchange rate, the central bank can sell
domestic currency at the fixed rate. To relieve downward pressure on the fixed
exchange rate, the central bank can purchase domestic currency at the fixed exchange
This is a very simplistic view of how a country can fix its exchange rate. For a more
compete discussion, i would suggest examining some international macroeconomic
theory textbooks available in most libraries.