Giving two examples, explain the relation between rise in price of a foreign currency and its demand.
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- When there is a rise in the price of foreign currency, the import gets costlier. It discourages the importers to import more and consequently, the demand for that foreign currency decreases.
- When the price of a foreign currency rises, the price of foreign assets also rise. It discourages domestic people and companies to buy foreign assets and consequently, the demand for that foreign currency decreases.
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