Like the other central banks, the Federal Reserve of the USA affects the foreign exchange markets in three general areas:
the discount rate;
the money market instruments;
foreign exchange operations.
For the foreign exchange operations most significant are repurchase agreements to sell the same security back at the same price at a predetermined date in the future (usually within 15 days), and at a specific rate of interest. This arrangement amounts to a temporary injection of reserves into the banking system. The impact on the foreign exchange market is that the dollar should weaken. The repurchase agreements may be either customer repos or system repos.