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Chapter 1 Foreign Exchange
US Dollar Index – in relation to 6 currencies: euro, Swiss Franc,
Japanese Yen, Canadian dollar, British pound, and Swedish
Krona - The value of the index is indicative of the dollar's value in
global markets.
Consequences for US economy of US $ foreign exchange rate
in relation to another currency:
Dollar depreciates: decrease in value of currency: more
competitive for US exporters, foreign goods more expensive for
US consumers
Ex:
1 euro = $0.85 (1.18 euros = $1) To
1 euro = $1.50 (0.67 euros = $1)
Dollar appreciates: increase in value of currency: less
competitive for US exporters, foreign goods cheaper for US
consumers
Ex:
1 euro = $1.50 (0.67 euros = $1) To
1 euro = $0.85 (1.18 euros = $1)