Question

Explain the relation between demand of foreign currency and exchange rate.

Answer 1

Explanation:

When exchange rate rises, demand for foreign exchange falls and when exchange rate of foreign currency falls, its demand rises. That is why demand curve for foreign exchange becomes downward sloping signifying the inverse relationship.

Answer 2

• equilibriumequilibrium foreign exchange rate is the rate at which demand and supply of foreign exchange at equal and a free market situation it is determined by the market for example demand and supply of foreign exchange there is an inverse relation between demand for foreign exchange and exchange rate their the district relationship between supply of foreign exchange and exchange rate due to above reason demand curve downward sloping and slope curve is upward sloping graphically intersections of demand curve and supply the determined the equilibrium of foreign exchange rate

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