ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a currency that is only traded offshore.
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a weighted average of the currencies of EU member countries.
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the currency of EU member countries.
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a currency, the value of which is determined by demand and supply.
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Detailed explanation-1: -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-2: -The value of a currency is determined by the interaction between the demand and supply of that currency relative to the demand and supply of other currencies. A spot exchange rate is quoted for 30 days, 90 days, and 180 days into the future.
Detailed explanation-3: -Summary. Currency value is determined by aggregate supply and demand. Supply and demand are influenced by a number of factors, including interest rates, inflation, capital flow, and money supply. The most common method to value currency is through exchange rates.
Detailed explanation-4: -Demand Curve of foreign exchange There is an inverse relationship between the rate of foreign exchange and demand for foreign exchange. It means the higher the rate, the lesser will be the demand for foreign exchange and vice-versa. Due to this reason, the demand curve slopes downwards.