future value of the domestic currency

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  As demand for the domestic currency increases and demand for foreign currency falls, the relative value of the domestic currency increases. So we have that the domestic currency appreciates. There's still one more effect, related to crowding-out.

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  Under a forward contract the parties agree to buy / sell a specified quantity of foreign currency on the specified date in exchange of domestic currency. 2. The other alternative is to use futures.

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  This is best suited as a tool for business to transfer foreign operations into realized domestic wealth. Future contracts are transferable agreements to exchange currency at a specific rate at some future date.

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