Question

What has happened to the exchange rate value of the dollar in each case?

Analyze the next 4 questions.

1. Spot rate goes from $1.25/SFr to $1.3/SFr.

2. Spot rate goes from SFr 0.8/$ to SFr 0.77/$

3. Spot rate goes from $0.010/yen to $0.009/yen

4. Spot rate goes from 100 yen/$ to 111 yen/$

Answer 1

1) when the spot rate goes from $1.25/SFR to $1.3/SFR

It means 1sfr that costed $1.25 now costs $1.3 I.e SFr has become more costly implies that SFr has strengthened and $ weakened.

Thus, we can say exchange value of $ has gone down

2) when spot rate goes from SFr 0.8/$ to SFr 0.77/$

It means that to buy 1$ 0.8SFr was needed or for 1SFr, 1.25$ is required

When spot rate goes to 0.77SFr/$ or 1SFr is equal to 1.29$

It means to buy 1 SFr 1.25$ was needed earlier and now 1.29$ is required

It implies that SFr has become costly , I.e exchange rate value of $ has weakened or $ has depreciated

c) when 1 yen--- 0.010$ goes to 1yen--- 0.009$

To buy 1 yen 0.010$ was needed and now 0.009$.

This meansyen has weakened and $ strengthened

Hence exchange rate value of $ has gone up

d) 100yen/$ to 110 yen/$

Implies that $ is costly by 10 yen now.

Hence exchange rate value of dollar has increased