Capital Movements

Categories: Global, Economics,

The transfer of capital between countries either by the import or export of securities, dividend payments or interest payments. For instance, when Japanese investors purchase American securities, the payment will be in dollars. Hence, a demand for the dollar is created, necessitating an increase in the dollar's exchange rate. Conversely, an American company would have to buy yen in order to pay its creditors. This would cause a demand in yen and the price of yen would increase in terms of dollars.