The Moroccan monetary authority is using a heavily managed float to keep the dirham at $0.12 per dirham. Under current foreign exchange market conditions, nonofficial supply and demand would clear at $0.15 per dirham.
- Using official intervention, what does the Moroccan monetary authority have to do to keep the exchange rate at $0.12 per dirham?
- If private investors and speculators believe that the $0.12 per dirham exchange rate is not sustainable, and the exchange rate should be higher ($0.15 per dirham), what actions are they likely to take?