ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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foreign exchange markets are always efficient.
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exchange rates should be determined by the market fundamentals.
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exchange rates are sometimes dependent to interest rates.
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None of the above
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Detailed explanation-1: -exchange rates should be determined by the market fundamentals. exchange rates should be determined by transactions that are included in the current account of the balance of payments. exchange rates move rapidly to return to equilibrium positions. foreign exchange markets are always efficient.
Detailed explanation-2: -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-3: -Determination of the Exchange Rate – Meaning Every nation has a distinct methodology to decide its currency’s exchange rate.. It can be decided via three methods which are : fixed exchange rate, managed floating exchange rate or pegged exchange rate, and flexible exchange rate.
Detailed explanation-4: -A floating exchange rate is one that is determined by supply and demand on the open market as well as macro factors.
Detailed explanation-5: -The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all aspects of buying, selling and exchanging currencies at current or determined prices.