Supply and Demand of Dollar

Supply of dollar comes from U.S citizens, banks, and industries wanting to purchase foreign goods investments assets and make transfer payments to foreigners.

Demand of dollar comes from foreigners, banks, and industries wanting to purchase U.S goods, investments, assets and make transfer payments to U.S.

Dollar Appreciates
Demand Increases
Supply  Decreases

Dollar Depreciates
Demand Decreases
Supply Increases


Fix Exchange rate- based on countries' willingness to distribute currency and control the amount (set by government).

Flexible or Floating exchange rate- based on supply and demand of the currency vs. other currencies (not government interventions based on market).

Five determinate of supply & demand in foreign exchange markets.

1. Change of buyer's taste
2. Change in relative income
3. Change in relative prices
4. Change in interest rates
5. Change in expectations