ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Ans. Foreign exchange rate is determined by the market forces of demand and supply in foreign exchange market. The point where demand and supply of foreign exchange meet, gives the equilibrium rate of exchange as shown in figure and quantity of foreign exchange.

Detailed explanation-2: -If you don’t know the exchange rate, you can use this formula: starting amount (base currency) / ending amount (foreign currency) = exchange rate. Use the currency conversion formulas mentioned earlier to calculate how much you’d get for your currency if you were trading in the forex market.

Detailed explanation-3: -The influences on the demand for Canadian dollars in the foreign exchange market include the exchange rate, world demand for Canadian exports, interest rates in Canada and other countries, and the expected future exchange rate.

Detailed explanation-4: -The foreign exchange market is the marketplace in which participants are able to sell, purchase, exchange and theorize on currencies. Foreign exchange markets are made up of investment management firms, banks, central banks, hedge funds, commercial companies and investors and retail forex brokers.