ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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foreign investment
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income receipts
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imports
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both a &c
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Detailed explanation-1: -Two sources of demand for foreign exchange are: (i) Imports from rest of the world. (ii) Foreign investment across the world.
Detailed explanation-2: -Answer: When the price of a foreign currency decreases, imports get cheaper in price. Hence, more demand occurs for foreign exchange by the importers.
Detailed explanation-3: -1. Exports of goods and services:Supply of foreign exchange comes through exports of goods and services. 2. Foreign investment: The amount which foreigners invest in their home country increases the supply of foreign exchange.
Detailed explanation-4: -India’s foreign exchange reserves are mainly composed of US dollar in the forms of US government bonds and institutional bonds. with nearly 7.34% of forex reserves in gold. The FCAs also include investments in US Treasury bonds, bonds of other selected governments and deposits with foreign central and commercial banks.
Detailed explanation-5: -Exports of Goods and Services: Foreign Investment: Remittances (Unilateral transfers) from abroad: Speculation: The supply of foreign currency rises in the following situations: