ECON102 Lecture Notes - Lecture 12: Rer E, Foreign Exchange Market, The Foreign Exchange

• School: University of Waterloo
• Department: Economics
• Course: ECON102
• Professor: Maryann Vaughan

Document Summary

The foreign exchange market: # of cad supplied in the foreign exchange market is the # that traders plan to sell during a given time period at a given exchange rate. Which also depends on many factors, the main of which are: the exchange rate, canadian demand for imports, interest rates in ca and other countries, the expected future exchange rate. The higher the exchange rate greater # of cad supplied in the foreign exchange market. Figure 9. 2 illustrates the supply curve of canadian dollars in the foreign exchange market. Figure 9. 3 shows how demand and supply in the foreign exchange market determine the exchange rate. (see slide 22- 24 for additional concepts) Exchange rate fluctuations: changes in the demand for cad. A change in any influence on the # of cad that people plan to buy, other than the exchange rate, brings a change in the demand for. Canadian interest rate relative to the foreign interest rate.