does foreign direct investment affect exchange rate?

@scooter_mx - 4 months ago - Fundamental Analysis

Hi, guys please do Foreign Direct Investments (FDI) influence the exchange rate of a currency? If so can you explain how?

@hosea_makelele - 4 months ago

Sure, it does because for foreigners to invest in a country they have to convert their currency to that of that country. This means a higher demand for the local currency thus causing it to become stronger,

This is why i always listen to news to be aware of government policy changes before trading a currency. Imagine that the US government enacts a policy to ban foreigners from owning homes in America, such a policy will weaken the US Dollar because it will reduce demand for the dollar.