The expectations of speculators in Canada that the exchange rate for the euro will fall in the future will increase the supply of euros in the foreign exchange market and decrease the exchange rate for the euros.

Question

Quizplus · Accepted Answer

If speculators in Canada believe that the euro will depreciate in the future, they will sell their euros and increase the supply of euros in the foreign exchange market. This increase in supply will put downward pressure on the exchange rate for euros, causing it to decrease.

The Expectations of Speculators in Canada That the Exchange Rate