This question is related to the answer to the question exchange rate and domestic money supply
It is said that the 'CB purchases foreign currency on currency market'.
Is it possible that some of this purchasing is even done within the domestic market (I would guess not but don't really know)? Or are we assuming that in circulation means within the domestic market and foreign market (again I would guess not)? Or is maybe that we assume/know that when in circulation, our currency will find its way back to our market and this will obviously result in more money in circulation. Maybe I am really thinking about it in the wrong way, and in circulation simply means that there are lenders out there now (foreign or domestic) that have more of our currency and will lend at a low interest rate.