Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The Yen appreciates due to increased demand from investors.
B
The Yen depreciates as investors sell their Yen to buy stocks.
C
The Yen remains stable since stock market performance does not influence currency.
D
The Yen fluctuates only if the Bank of Japan intervenes.
Understanding the Answer
Let's break down why this is correct
Answer
When the Japanese stock market has higher returns, it often attracts more foreign investment. Investors from other countries want to buy Japanese stocks to benefit from these gains, which means they need to exchange their currency for Yen. This increased demand for Yen generally causes the value of the Yen to rise compared to other currencies. For example, if a foreign investor wants to invest in a profitable Japanese company, they will buy Yen to purchase the stocks, which helps strengthen the Yen's exchange rate. Therefore, an increase in stock market returns usually leads to a stronger Yen in the foreign exchange market.
Detailed Explanation
When the stock market does well, more investors want to buy Japanese stocks. Other options are incorrect because Some might think that selling Yen to buy stocks lowers its value; It's a common belief that stock performance doesn't affect currency.
Key Concepts
Foreign Exchange Market Dynamics
Investor Behavior
Currency Appreciation
Topic
Foreign Exchange Market Dynamics
Difficulty
hard level question
Cognitive Level
understand
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