Foreign currency demand answers generally to the actual situation of each currency. If one foreign currency is in a good situation, where it is marketed, it will increase the demand more than any other.
What makes foreing currency demand increase? In Latinamerica, more exactly in Argentina the actual exchange rate is 3,20 of argentine peso, per each american dollar. This devaluation of argentine peso makes buyer have uncertainty and that’s why the biggest demand of foreign currency in uncertainty times is for the dollar. This situation means that the argentine peso suffers the inflation that there is in Argentina, instead dollar can continue raising or keeping actual levels.
The political-economical situation makes people search a strong currency, and so a bigger demand on this currency. The foreign currency demand has to be understand as a thermometer that shows the economy rhythm. It is not by chance that people try to be out of risk buying american dollars or Euro, the strongest and safest foreign currencies of the world.
During the worst crisis of latinoamerican countries happened that in front of the uncertainty that brought many political decisions, popolation started to buy a stronger currency to support them in difficult times. But pay attention, foreign currency demand should also be regulated because on the contrary it can provoke effects opposite to those searched.

Foreign currencies demand depends on the market situation and the investors’like. The increase or the fall of foreign currencies demand is ususally one of the thermometers that show the actual trend of the market. What happens with the yen, for example a weak currency but that often is one of the foreign currencies that has the biggest demand? What is the reason of this trend? Japanese currency has become the center while deciding whether to invest or not for risk investors. Japanese foreign currencies demand shows that the advantage that the yen has in front of other currencies, is the low interest rate. When investors are determined to assume more risks, they get into debt on a cheap way in yenes, taking advantage of the law interest rates and then they invest on countries where returns per investment are higher. That’s the way foreign currencies demand answers to the risk that investor is determined to take.
This operation that we have descrived previously debilitate the Japanese currency as moneylenders sell yenes and buy other foreign currencies. Situation changes according to foreign currencies demand when investors avoid risk. These operations are know as carry trader, basically what they do is buying a foreign currency to sell at the same time other. In this way, investor bet to have one foreign currency appreciated according to the other.
A very common carry trader, that takes a fundamental part in foreign currencies demand, is to borrow money in Japan, which reference interest rate is 0.5%, and invest in Australia, that has an interest rate of 6.75%.