Question

use (www.federalreserve.gov)

1. Determine how exchange rates of various currencies
have changed in recent months. Note that most of these
currencies (except the British pound) may be quoted in
units per dollar. In general, have most currencies strengthened
or weakened against the dollar over the last three
months? Offer one or more reasons to explain the recent
general movements in currency values against the dollar.

2. Does it appear that the Asian currencies move in
the same direction relative to the dollar? Does it appear
that the Latin American currencies move in the same
direction against the dollar? Explain.

Answer 1

Ans 1) Many currencies like Mwxican Peso, Lira and Indian Rupee depriciated from 10 to 50% in comparision to US dollar. Main reason behind these depriciation is because of increae in fed rate by federal reserve which make US an attractive investment in comparision to other emerging market. It leads to pull out of money from these countries and invetors are started investing in US market since it is giving more return.

Ans 2) No Asain currencies and Latin American currencies are not moved in same direction against dollar since it depreciated. Asain currencies though depreciated less in comparision to Latin America due to US investors less exposure in Asian market in comparision to Latin America. There is also sanctioned by the US government which lead to free fall of some currencies in Asian and Latin America market.