Question

Participants in the foreign exchange market trade for all of the following reasons EXCEPT?

1) to earn short-term profits from fluctuations in exchange rates.
2) to protect themselves from loss resulting from changes in exchange rates.
3) to acquire the foreign currency necessary to buy goods and services from other countries.
4) to acquire the currency necessary to buy imports in their home country.

Answer 1

In the foreign exchange market, participants engage in trades to earn profits, hedge against exchange rate risks, and acquire currency for buying goods and services internationally, not purely for the purpose of buying imports in their own country.

Step-by-step explanation:

Participants in the foreign exchange market engage in currency trades for various reasons. They might be looking to earn short-term profits from fluctuations in exchange rates, or they could be aiming to protect themselves from potential losses resulting from changes in exchange rates. They may also need to obtain foreign currency to buy goods and services from other countries or to purchase imports in their home country. However, engaging in foreign exchange market activities purely to obtain currency for buying imports in their home country is not entirely accurate as it overlaps with the intent of acquiring currency for international trade.