Suppose we were analyzing the pound per Swiss franc foreign exchange market. If there is the expectation that the Swiss franc will rise in value in the near future, then in the spot market:
a. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market falls, causing an uncertain change in the value of the Swiss franc.
b. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market rises, causing an appreciation of the Swiss franc.
c. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market rises, causing an uncertain change in the value of the Swiss franc.
d. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market falls, causing a depreciation of the Swiss franc.
e. Neither supply nor demand in the foreign exchange market change because relative international prices influence trade flows and not the exchange rate.
.B
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