Effect of Changes in Supply and Demand on Exchange Rates

Effect of Changes in Supply and Demand on Exchange Rates

• if demand for a currency increases the currency appreciates
• if demand for a currency decreases the currency depreciates
• if supply of a currency increases the currency depreciates
• if supply of a currency decreases the currency appreciates

• if one currency appreciates then another countries depreciates
• demand for foreign currency causes an increase in the supply of Canadian dollars
• demand for Canadian dollars causes an increase in supply of foreign currencie

Dr. Stephanie Powers, "Exchange rate", Intro to Macroeconomics.(Lecture, Donald School of Business, Red Deer Alberta, Winter 2012)