Signals regarding future actions of market participants in the foreign exchange market sometimes result in overreactions.

Question

Quizplus · Accepted Answer

This statement is true. The behavior of market participants in the foreign exchange market is often driven by expectations and perceived future events, which can sometimes lead to overreactions and exaggerated movements in exchange rates. This is because participants may act on incomplete or misleading information, or may be influenced by emotions such as fear or greed, rather than rational analysis of fundamentals.

Signals Regarding Future Actions of Market Participants in the Foreign