Question

For each of the following, is it part of demand for yen or supply of yen...

For each of the following, is it part of demand for yen or supply of yen in the foreign exchange market?

a. A Japanese firm sells its U.S. government securities to obtain funds to buy real estate in Japan.

b. A U.S. import company pays for glassware purchased from a small Japanese producer.

c. A U.S. farm cooperative receives payment from a Japanese importer of U.S. oranges.

d. A U.S. pension fund uses some incoming contributions to buy equity shares of

several Japanese companies through the Tokyo stock exchange.

e. A Japanese estate company receives retained profits earned by its joint venture operating only in the U.S.

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Answer #1

a] As the firm is selling US government securities (denominated in USD) and exchanging them into yen, it is a demand for yen in the forex market

b] As the US company needs to pay the Japanese producer in yen, it will exchange USD for yen. It is a demand for yen in the forex market

c] As the Japanese company needs to pay the US producer in USD, it will exchange yen for USD. It is a supply for yen in the forex market

d] As the US fund's contributions are received in USD, it will exchange USD into yen. It is demand for yen in the forex market

e] As the joint venture pays the parent company in yen, it will exchange USD for yen. It is a demand for yen in the forex market

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