Question

Assume that the Polish currency (called zloty) is worth $.32. The U.S. dollar is worth .7 euros. A U.S. dollar can be exchanged for 8 Mexican pesos. Last year a dollar was valued at 2.9 Polish zloty, and the peso was valued at $.10.

a. Would U.S. exporters to Mexico that accept pesos as payment be favorably or unfavorably affected by the change in the Mexican peso’s value over the last year?

b. Would U.S. importers from Poland that pay for imports in zloty be favourably or unfavorably affected by the change in the zloty’s value over the last year?

Answer 1

1.

US exporter would be positively impacted when pesos appreciate and negatively impacted when pesos depreciate. As pesos have appreciated (1/8=0.125 dollars/pesos this year versus 0.10 dollars/pesos laat year) this change would have favorably affected

2.

US importer would be positively impacted when zlotys depreciate and nwgatively impacted when zlotys appreciate. As zlotys have depreciated (1/0.32=3.125 zlotys per dollar this year versus 2.9 zlotys per dollar last year) this change would have favorably affected US importer