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Why does the demand for foreign exchange currency fall and supply rises when its price rises. Explain.

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The demand for foreign currency fall and supply rises when its price rises because domestic goods become cheaper. It induces the foreign currency to increase their imports from the domestic country. 

Hence, supply of foreign currency rises. 

For example, if price of 1 US dollar rises from Rs 53 to Rs 59, it implies that exports to US will increase as Indian goods will become relatively cheaper. It will raise the supply of US dollars.

When price of a foreign currency falls, its demand rises as more people want to make gains from speculative activities.

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