Which of the following factors makes a currency more attractive to investors? (2024)

Which of the following factors makes a currency more attractive to investors?

Expert-Verified Answer

Which factor makes a currency more attractive to investors?

Generally, higher interest rates increase the value of a country's currency. Higher interest rates tend to attract foreign investment, increasing the demand for and value of the home country's currency.

What are the three main factors that affect currency values _________________?

When the dollar is traded, three factors can drive its value, including supply and demand, market sentiment, and technical market data.

What are the 3 factors affecting the demand for foreign currency?

The demand for foreign-currency denominated assets is in turn affected by the expected returns on those assets, the risks of those assets as well as the liquidity of those assets, all relative to domestic assets.

What 3 factors help to determine the strength of a country's currency?

The relative strength and weakness of a given currency versus a rival is influenced by a number of factors, but the most common are the interest rates of each country, the trade balance of each country, and the perceived stability of the currency and the governments.

What 4 factors affect the value of a country's currency?

Why do investors prefer money market?

Money market funds invest in highly liquid securities like cash, cash equivalents, and high-rated debt-based securities. Because they only invest in highly rated securities, money market funds offer a high degree of safety. Money market funds also offer investors higher yields than traditional savings accounts.

Which is the major factors to determine rate of currency?

Supply and demand dictate foreign exchange rates. For example, greater demand for British goods would see an increase in the value (appreciation) of the Pound. Markets worried about the future of the Eurozone economies would tend to sell Euros leading to a depreciation of the Euro.

What is the currency factor?

Extant currency factors include the carry, volatility, value, and momentum factors. Using a new clustering technique, we find a clear two-block structure in currency comovements with the first block containing mostly the dollar currencies, and the other the European currencies.

What is the strongest currency?

The Kuwaiti dinar continues to remain the highest currency in the world, owing to Kuwait's economic stability. The country's economy primarily relies on oil exports because it has one of the world's largest reserves.

What is the most important source of demand for foreign currency?

Imports of goods and services from a foreign country is the source of demand for foreign currency because payments made to the foreign sellers are done in foreign currency.

What factors give rise to demand and supply of foreign currency?

Currency supply and demand are influenced by various economic, political, and social factors. These factors include inflation rates, interest rates, economic growth, political stability, and geopolitical events.

What factors might lead to an increase in the demand for a currency?

The demand for a foreign currency increases when demand for imports grows. This is because people need to pay for imports in the foreign currency of the country whose product they are looking to consume. If domestic investors are looking to invest in a foreign country, they will demand that country's currency.

What is the most important characteristic for a strong currency?

Of all the qualities of good money, stability is probably the most essential one. The value of money cannot change for a long period of time and hence remain stable. If the value of money keeps changing, then it will fail to function as a measure of value and as a standard of deferred payment.

What are some factors that can influence the exchange rate of currency?

What makes a currency weak?

Fundamentally weak currencies often share some common traits. They can include a high rate of inflation, chronic current account and budget deficits, and sluggish economic growth.

What affects the supply of a currency?

Supply of a currency is an outflow of money into an economy. The supply of a currency is determined by level of domestic demand for / expenditure on imported goods and services from abroad. It is also influenced by speculative outflows of a country's currencies on the foreign exchange markets.

What are two disadvantages of a money market fund?

Key takeaways

Disadvantages of money market accounts may include hefty minimum balance requirements and monthly fees — and you might be able to find better yields with other deposit accounts.

Can a money market account lose money?

There is no direct way to lose money in a money market account. However, it is possible to lose money indirectly. For example, if the interest rate you receive on your account balance can no longer keep up with any penalty fees you may be assessed, the value of the account can fall below the initial deposit.

Should I put all my money in a money market fund?

The Bottom Line

While money market funds aren't ideal for long-term investing due to their low returns and lack of capital appreciation, they offer a stable, secure investment option for individuals looking to invest for the short term.

What controls the rate of currency?

Current international exchange rates are determined by a managed floating exchange rate. A managed floating exchange rate means that each currency's value is affected by the economic actions of its government or central bank.

What are the factors responsible for inflow of foreign currency?

The main factors that can impact the behaviour of the foreign exchange market are interest rates, inflation rates, political stability, economic performance, and speculation.

What is the weakest currency in the world?

What Is the Weakest Currency in the World? The weakest currency in the world is the Iranian rial (IRR). The USD to IRR operational rate of exchange is 371,992, meaning that one U.S. dollar equals 371,922 Iranian rials.

What factors affect the value of a country's currency quizlet?

How does currency lose value?

When productivity declines faster than the supply of money, the value of each unit of currency drops. The most common monetary phenomenon, inflation, is produced the other way around; the supply of money grows faster than productivity.