Question

1-relationship between demand for foreign exchange and exchange rate(inverse or direct)
2-relationship between exchange rate and demand for foreign exchange.(inverse or direct)
3-is improvement in exchange rate of country currency always beneficial?in this it is appreciate or dep as acc to me it is dep. as in diagrams we make when exhange rate inc. our country currency is depreciated.

Answer 1

Dear student,

Your first & second query is same.
Exchange rate is inversely related to demand for foreign exchange.
When price of foreign currency rises, it leads to costlier imports for country. As imports become costlier, demand of foreign product falls. This lead to reduction in demand of foreign exchange and vice versa. The domestic currency depreciates with a rise in exchange rate

Regards