The representative of the Bundesbank, West Germany's central bank, has a special chair in the foreign exchange trading room at the Frankfurt Stock Exchange. When he buys or sells millions of US dollars, or some other currency, traders in that room take notice. Like other central banks, the Bundesbank affects the supply and demand for its currency, which establishes the value of that currency against others. Commercial banks, multinational companies, and speculators move billions of dollars through these markets daily.
But governments are limited in their influence on the market. This is because they have finite reserves of foreign currency and are reluctant to sell too much of their own for fear of stimulating domestic inflation. The major industrial governments in Paris indicated they will intervene if necessary to stabilize the markets.