BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Government policies
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Monetary policy directives
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Demand and supply forces
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Foreign exchange reserves
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Detailed explanation-1: -The supply of foreign exchange depends on the country’s import of goods & services to foreign countries.
Detailed explanation-2: -As the price of a foreign currency increases, the quantity supplied of that currency increases. Exchange rates are determined just like other prices: by the interaction of supply and demand. At the equilibrium exchange rate, the supply and demand for a currency are equal.
Detailed explanation-3: -In a floating regime, exchange rates are generally determined by the market forces of supply and demand for foreign exchange. For many years, floating exchange rates have been the regime used by the world’s major currencies – that is, the US dollar, the euro area’s euro, the Japanese yen and the UK pound sterling.
Detailed explanation-4: -A floating rate is determined by the open market through supply and demand on global currency markets. Therefore, if the demand for the currency is high, the value will increase. If demand is low, this will drive that currency price lower.