The demand for domestic currency in the foreign exchange market is indicated by the following transactions in balance of payment

Question

Quizplus · Accepted Answer

The demand for a country's domestic currency in the foreign exchange market is driven by transactions that bring foreign currency into the country, such as the export of goods and services (which generates income from foreign buyers in foreign currencies that is then converted to the domestic currency) and capital inflows (investment from abroad into the country, which also involves converting foreign currencies into the domestic currency).

The Demand for Domestic Currency in the Foreign Exchange Market