In foreign exchange markets,how is the demand for dollars determined?

Question

Quizplus · Accepted Answer

The demand for dollars in foreign exchange markets is determined by the level of Canadian exports and the demand for Canadian assets by foreigners. As foreigners buy Canadian goods and assets, they need to exchange their own currency for Canadian dollars, increasing the demand for Canadian dollars. Similarly, if foreigners are looking to invest in Canada, they will need to exchange their currency for Canadian dollars, again increasing the demand. Conversely, if Canadian exports are weak or there is little foreign interest in Canadian assets, the demand for Canadian dollars will decrease. The level of Canadian imports and the demand for foreign assets by Canadian citizens and the Canadian government can also impact the exchange rate, but are not the sole determinants of the demand for dollars.

In Foreign Exchange Markets,how Is the Demand for Dollars Determined