Question

If the expected exchange rate appreciates. the current exchange rate immediately appreciates. (True, false, or uncertain)...

If the expected exchange rate appreciates. the current exchange rate immediately appreciates.

(True, false, or uncertain) explain briefly.

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Answer #1

True

If the expected exchange rate appreciate then it will affect the current exchange rate as well.

For example:-

If there is increase in expected exchange rate of $ per £ . Which means in future £ will appreciate and $ will depreciate. Now the investor would more attracted to the British investments as compare to american investments. demand for £ will increases and exchange rate will shift to the higher level. Current exchange rate of $ per £ will also increases. Which shows £ is appreciate due to expected appreciation of exchange rates in future.

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