Demand and Supply of Currency in Forex Market

The demand for currencies in forex markets arise from the demand for a country’s exports. Also, speculators who are looking for a profit relying on the changes in currency values create demand.

The supply of a particular currency is derived by domestic demands for imports from the foreign nations. For example, let us suppose the UK has imported some cars from Japan. So, UK must pay the price of cars in Yen (¥), and it will have to buy Yen. To buy Yen, it must sell (supply) Pounds. The more the imports, the greater will be the supply of Pounds onto the Forex market.

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