How do central banks primarily influence the value of a currency?

Central banks primarily influence the value of a currency through adjusting interest rates and implementing monetary policies. This is a fundamental mechanism that affects the money supply within an economy. When a central bank raises interest rates, it typically leads to an increase in the value of the currency. Higher interest rates provide better returns on investments denominated in that currency, attracting foreign capital and increasing demand for the currency itself.

Conversely, if a central bank lowers interest rates, the currency may weaken as investors seek higher returns elsewhere. Additionally, the central bank can utilize monetary policy tools, such as open market operations and reserve requirements, to control inflation and stabilize the economy, further influencing the currency's value.

In contrast, other methods such as altering trade tariffs and export policies or regulating foreign direct investments have a more indirect impact on currency values and are not the primary tools central banks use for this purpose. Similarly, public relations campaigns do not have a direct effect on currency valuation and are more related to market perceptions rather than economic fundamentals.