How does demand for foreign exchange affect exchange rates?
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Currencies are bought and sold, just like other commodities, in markets called foreign exchange markets The world’s three most common transactions are exchanges between the dollar and the euro (30%) the dollar and the yen (20%) and the dollar and the pound Sterling (12%).
The demand for currencies is derived from the demand for a country’s exports, and from speculators looking to make a profit on changes in currency values.The market will create an equilibrium exchange rate for each currency, which will exist where demand and supply of currencies equates.
The demand for currencies is derived from the demand for a country’s exports, and from speculators looking to make a profit on changes in currency values.The market will create an equilibrium exchange rate for each currency, which will exist where demand and supply of currencies equates.
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