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Three major factors that cause a country's currency to appreciate or depreciate relative to another's * Differences in income growth among nations will cause nations with the highest income growth to demand more imported goods. The heightened demand for imports will increase demand for foreign currencies, appreciating the foreign currencies relative to the domestic currency. * Differences in inflation rates will cause the residents of the country with the highest flation ratet to demand more imported(cheaper) goods. If a country's inflation rate is higher than its trading partners', the demand for the country's currency will be low, and the currency will depreciate. * Differences in real interest rates will cause a flow of capital into these countries with the highest available real rates of the interest. Therefore, there will be an increased demand for those currencies, and they will appreciate relative to the currencies of countries whose available real rate of return is low. By
Mujeeb
What else can I help you with?
When exports exceed imports will the us dollar appreciate or depreciate?
Appreciate.
Ask us of the following best explains what happens to the exchange rate of a floating currency?
The exchange rate of a floating currency is determined by market forces, primarily supply and demand. Factors such as interest rates, inflation, political stability, and economic performance influence investor perception and demand for the currency. As these factors change, they can lead to fluctuations in the currency's value relative to others. Consequently, a floating currency can appreciate or depreciate based on the ongoing economic conditions and market sentiment.
How does the interest rate in a country affect equilibrium currency prices?
If a country raises its interest rates, its currency prices will strengthen because the higher interest rates attract more foreign investors. This answer sounds exactly logical as I think about it, yet, in economics books, under the uncovered interest rate parity model, a country with a higher interest rate should expect its currency to depreciate. I would agree with this proposition in the long run an expensive currency will hurt exports... but in the very short run... let's say once the CB declaires a rise in interest rate, by how much should one expect the currency to appreciate? is there any formula for this?
What happen to the exchange rate when there is a zero trade balance?
When a country has a zero trade balance, it means that its exports and imports are equal, resulting in no net flow of currency due to trade. In this scenario, the exchange rate may stabilize, as there is no pressure on the currency to appreciate or depreciate due to trade imbalances. However, other factors, such as capital flows and interest rates, can still influence the exchange rate. Overall, a zero trade balance can contribute to a more stable exchange rate environment.
How do high interest rates impact the appreciation of a currency?
High interest rates can lead to an increase in the value of a currency because they attract foreign investors seeking higher returns on their investments. This increased demand for the currency can cause its value to appreciate.
Is it correct to say that the rand can appreciate or depreciate?
Assuming you are referring to the South African unit of currency, YES, the rand can appreciate OR depreciate.
Does currency appreciate or depreciate if the forward rate increases?
If the forward rate increases, it indicates that the currency will depreciate in the future. This is because a higher forward rate implies that the currency will be worth less in the future compared to the present.
What is a antonyms for appreciate?
Depreciate.
When exports exceed imports will the us dollar appreciate or depreciate?
Appreciate.
Suppose that US incomes rise relative to British incomes Then?
The dollar will depreciate and the pound will appreciate.
What will happen to the import if the exchange rate increase?
Usually, the currency will depreciate (lose value).
Ask us of the following best explains what happens to the exchange rate of a floating currency?
The exchange rate of a floating currency is determined by market forces, primarily supply and demand. Factors such as interest rates, inflation, political stability, and economic performance influence investor perception and demand for the currency. As these factors change, they can lead to fluctuations in the currency's value relative to others. Consequently, a floating currency can appreciate or depreciate based on the ongoing economic conditions and market sentiment.
What is surplus on revaluation of asset?
Surplus on revaluation of assets means that on the even of revaluation, more assets has appreciate in their value then depreciate.
Why do people invest in low return funds even though their money will depreciate more than they will profit?
people investing in low return fund so as to minimize risk especially risk associated with depreciate of currency value
How does the interest rate in a country affect equilibrium currency prices?
If a country raises its interest rates, its currency prices will strengthen because the higher interest rates attract more foreign investors. This answer sounds exactly logical as I think about it, yet, in economics books, under the uncovered interest rate parity model, a country with a higher interest rate should expect its currency to depreciate. I would agree with this proposition in the long run an expensive currency will hurt exports... but in the very short run... let's say once the CB declaires a rise in interest rate, by how much should one expect the currency to appreciate? is there any formula for this?
How does a currency appreciate?
An increase in the value of one currency relative to another currency. Appreciation occurs when, because of a change in exchange rates; a unit of one currency buys more units of another currency.
What happen to the exchange rate when there is a zero trade balance?
When a country has a zero trade balance, it means that its exports and imports are equal, resulting in no net flow of currency due to trade. In this scenario, the exchange rate may stabilize, as there is no pressure on the currency to appreciate or depreciate due to trade imbalances. However, other factors, such as capital flows and interest rates, can still influence the exchange rate. Overall, a zero trade balance can contribute to a more stable exchange rate environment.
