Final answer:
The statement is false; participants in the foreign exchange markets can purchase assets priced in the currency they have acquired, including engaging in foreign direct investments or portfolio investments.
Step-by-step explanation:
The statement that foreign currency market participants are generally restricted from purchasing assets priced in the purchased currency is false. In the foreign exchange markets, participants such as firms involved in international trade, tourists, and international investors, are actively engaged in buying and selling currencies to facilitate their investments and expenditures in other countries. These investments could include buying ownership in foreign firms or making financial investments that do not involve ownership.
The foreign exchange market operates through financial institutions on several levels, and there is no inherent restriction on what can be done with the purchased currency. Investors can engage in foreign direct investment, which typically involves taking on some managerial responsibility and has a longer-term focus, or they can quickly enter or exit portfolio investments like government bonds with relative ease.
Thus, participants in the foreign exchange market can indeed purchase assets priced in the currency they have acquired, whether that be real estate, companies, or financial instruments like stocks and bonds.