Question

)Investors in international finance are moving funds from Country X to other countries. This depreciation is causing even more disenchantment with Country X's currency. Describe the affects will this have on the supply and demand curves for this currency on the foreign exchange markets.

Answer 1

The supply for the currency will be bigger while the demand for the currency will be lower causing the currency value to depreciate.

Step-by-step explanation:

As current foreign investors move fund out of country X, they will have to exchange their invested fund denominated in country X's currency to another currency which will result in higher supply of Country X's currency in the market.

Fewer foreign investors also means the demand for exchanging foreign's fund for Country X's currency to further expand investment or to start a brand-new investment will be lower because these investor will keep its fund denominating in the currency of their investment destination.

The affects on both supply and demand of country X's currency will cause further depreciation of the currency.