Question

Which of the following would most likely be a supplier of U.S. dollars in the foreign exchange market?

a) A Swedish resident who is traveling to the United States.
b) A French investor who intends to buy U.S. government bonds.
c) A resident of Belgium who is traveling to Australia.
d) A U.S. company that is importing oranges from Israel.
e) A French importer of U.S. beef.

Answer 1

A French investor looking to buy U.S. government bonds is most likely a supplier of U.S. dollars in the foreign exchange market, as financial investors decrease the supply of U.S. dollars they hold while increasing demand to purchase assets.

Step-by-step explanation:

The supplier of U.S. dollars in the foreign exchange market would most likely be a French investor who intends to buy U.S. government bonds. This is because international financial investors will demand more U.S. dollars to purchase assets like U.S. government bonds and therefore supply fewer U.S. dollars that they already hold in these markets.

As demand for U.S. dollars increases on the foreign exchange market, and supply falls, the exchange rate appreciates. International tourists, by contrast, supply their home currency and demand the currency of the country they are visiting.