Consequently, unless central banks in fixed exchange rate regimes can get commercial banks to use their foreign exchange resources, and we have in Barbados, been trying to do this (Trinidad and Jamaica operate that way all the time), fixed exchange regimes will find it necessary to hold higher levels of foreign exchange than their counterparts in floating rate regimes where the exchange rate is not sacrosanct.
Foreign exchange reserves and support for exchange rates Foreign exchange intervention aimed at preventing currency depreciation requires high levels of foreign exchange reserves. In some floating rate economies regimes, authorities often worry that a steep depreciation of the currency could have political and credit risks and will intervene in order to support the rate or to slow its depreciation.