ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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inverse
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direct
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Either A or B
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None of the above
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Detailed explanation-1: -Exchange rate of foreign currency is inversely related to the demand. When price of a foreign currency rises, it results into costlier imports for the country. As imports become costlier, the demand for foreign products also reduce. This leads to reduction in demand for that foreign currency and vice-versa.
Detailed explanation-2: -The demand for foreign exchange varies inversely with the exchange rate.
Detailed explanation-3: -The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value. In contrast, if a country imports more than it exports, there is relatively less demand for its currency, so prices should decline. In the case of currency, it depreciates or loses value.