Demand side in market for foreign exchange

individuals participate in the foreign exchange market for a number of reasons .On the demand side ,one of the principle reasons people desire foreign currency is to purchase goods and services from another country or to send gift or investment income payments abroad .For example ,the desire to purchase a foreign automobile or to travel a broad produces a demand for the currency of the country in which these goods or services are produced .A second important reason to acquire foreign currency is to purchase financial assets in the a particular country . The desire to open foreign bank account, purchase foreign stocks or bonds , or acquire direct ownership of real capital would all fall into this category . A third reason that individuals demand foreign exchange is to avoid losses or make profits that could arise through changes in the foreign exchange rate . individuals who believe that the foreign currency is going to become more valuable in the future may wish to acquire that currency today at a low price in hopes of selling it tomorrow at a high price and thus make a quick profit. Such risk-taking activity is referred to as speculation in a foreign currency .