c hapter 8. foreign exchange and international financial markets. Chapter Objectives 1. Describe how demand and supply determine the price of foreign exchange Discuss the role of international banks in the foreign-exchange market
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foreign exchange and international financial markets
Foreign exchange is a commodity that consists of currencies issued by countries other than one’s own.
Demand for Japanese Yen is Derived from Foreigner’s Demand for Japanese Products
Supply for Japanese Yen is Derived from Japanese Demand for Foreign Products
The Chinese foreign-exchange trader is an important link in the $1.9 trillion-per-day global exchange market.
Arbitrage is the riskless purchase of a product in one market for immediate resale in a second market in order to profit from a price discrepancy. There are two types of arbitrage activities that affect the foreign-exchange market: arbitrage of goods and arbitrage of money.