The following statements pertain to foreign exchange markets. Label each stateme

Question

The following statements pertain to foreign exchange markets. Label each statement as being either true or false. Each term may be used more than once. There are countries other than the U.S. that use the U.S. dollar as their official currency The majority of foreign exchange trades are associated with tourism. Foreign exchange swaps involve buying and selling a pre-set amount of currency on the same day. The foreign exchange market is larger than the stock or bond markets The U.S. dollar is no longer the world's most highly traded currency as economies in Asia have developed. False True

Explanation / Answer

Ans:

1) True

Ecuador, El Salvador,Federated States of Micronesia, Marshall Islands are countries which use US dollar as their official curriency.

2) False

Tourism has major impact on foreign exchange market but trade and investment have large role in foreign exchange trade.

3) False

foreign exchange swap is a simultaneous purchase and sale of identical amounts of one currency for another involving two different value dates of spot and forward.

4) True

Foreign exchange market is larger than the combined stock and bond market.

5) False

U.S. dollar is the worlds most highly traded currency due to the U.S. dollar's global acceptance.

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