Ceteris Paribus
The determinants for exchange rates are;
- If the demand for a nation's currency increases, that currency will appreciate.
- If the supply of a nation's currency decreases, taht currency will appreciate.
- If a nation's currency appreciates, some foreign currency will depreciate relative to it.
This means that in the years of 2002-2005, the Euro has appreciated relative to the RMB, or, the RMB has depreciated relative to the Euro.
1 comment:
Determinants of exchange rates:
1) relative price levels
2) relative incomes
3) consumer tastes and preferences
4) relative interest rates
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