You are an analyst following a medium-sized country that has a fixed exchange rate of 5 dinars per U.S. dollar (with a band of 2 percent above and below this par value).

During March of last year you know that the country’s monetary authority intervened in the foreign exchange market by buying U.S. \($2\) billion. During the next month (April)

you know that the country’s monetary authority intervened to sell U.S. \($3\) billion.

What are two different changes in the foreign exchange market that could explain the different interventions during these two months? For each of the two changes, use a graph of the foreign exchange market to illustrate why the change resulted in the different interventions.