If a country’s par exchange rate was undervalued during the Bretton Woods fixed exchange rate regime, what kind of intervention would that country’s central bank be forced to undertake, and what effect would the intervention have on the country’s international reserves and money supply?

Bretton woods rate regime refers to the fixed rate system under which U.S dollar was kept as reserve currency and intervention of financial organization was required within the interchange market to stay the fixed rate of exchange.

The purchase of the currency by the financial organization would increase the demand for the currency which is able to increase the worth of that currency within the exchange market and also the fixed rate of exchange can be maintained. the acquisition of the domestic currency would happen in exchange of foreign currency which might reduce the international reserves in this country and therefore the purchase of domestic currency by the financial organisation would also reduce the cash supply of that currency within the exchange market.