Question

The Value of the US $ has always floated in a wide range of valuations the...

The Value of the US $ has always floated in a wide range of valuations the past few decades. Many factors were involved in the variations such as; USA Government monetary policy, the rapid growth of Japanese exports in later part of last century and of China in the current century; the formation of the European Union and later effects of Brexit; along with many international events such as wars, terrorist acts, and other international events.

The past few years have seen a contentious Trump Presidency and a national divide as we progress through an election year with a near term election date, moving from a rapidly growing USA economy including a rising stock market with wide fluctuations and then the sudden brakes of the Covid 19 Virus, continued trade tensions via tariffs and numerous recent revised agreements on regional trade agreements by the USA, a rather stagnant world economy and the impacts of Brexit on the EU, and the current health scare and long term effects of the Covid 19 Virus going forward.

1) Given this turmoil, what do you believe will be the future trend of the US $ both on the 30/60/90 exchange market along with a plus 1 year trend as measured against typical foreign currencies ?

Homework Answers

Answer #1

Answer 1:

Given the current pandemic situation and decline in the growth rate of the world economies both developed and developing. it can be predicted that the economies of various nations will take some time to reover from the ongoing recession. Almost all the economies of the world are operating at below their potential level of GDP because of both demand and supply side shocks in the economy in negative direction.

Given the above situation, it can be predicted that the current exchange of dollar in the foreign exchange market will also decrease because of the fall in net exports of the economy and also reduction in Net Capital Inflow in the economy. Both these changes will lead to fall in the demand for dollars in the foreign exchange market and in future it can be predicted that dollar will depreciate in the foreign exchange market.

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