The first category which affects this chain is the import companies. Assume a British retail firm specializes in trading merchandise from China. Then, the payment for buying these products would be in Chinese yuan. If there is a sudden increase in the demand of Chinese goods, then the demand for the currency also goes up. This is because the retail companies would purchase more of these goods from the manufacturers and wholesalers and pay for them in Chinese Yuan. Similarly, assume that a foreign investor plans to start a new venture in another country. The demand of the foreign country currency automatically increases. Example, a Belgian manufacturer wants to start a new factory in Canada. In order to set up the same, he needs to purchase land, hire employees and also buy the inventory needed to start the plant. For this, he needs to pay in Canadian Dollars. This means that the demand for the currency increases. There are a certain category of speculators who may want to invest in some currency today, thinking the value would go up in the future. These speculators also can increase the demand of a particular currency. If a central bank thinks it does not have a strong hold of a particular currency, then a decision may be taken to purchase it in the open market. This may also result in increase in the demand of a particular currency.
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