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Determinants of foreign exchange rates

Determinants of foreign exchange rates. 1. Price level in Mexico increases. The Market for Dollars. The Market for Pesos. S. S. Dollar / Pesos exchange rate. Peso / dollar exchange rate. D. D. Quantity of Dollars. Quantity of Pesos.

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Determinants of foreign exchange rates

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  1. Determinants of foreign exchange rates

  2. 1. Price level in Mexico increases The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  3. 1. Price level in Mexico increasesthe dollar appreciates the peso depreciates The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  4. 2. Interest rates in Mexico increase The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  5. 2. Interest rates in Mexico increasethe dollar depreciates the peso appreciates The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  6. 3. Interest rates in the US increase The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  7. 3. Interest rates in the US increasethe dollar appreciates the peso depreciates The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  8. 4. Mexico’s real GDP increases The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  9. 4. Mexico’s real GDP increasesthe dollar appreciates the peso depreciates The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  10. 5. US government reduces taxes The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  11. 5. US government reduces taxesthe dollar depreciates the peso appreciates The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  12. 6. Americans increase their demand for Mexican tomatoes The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  13. 6. Americans increase their demand for Mexican tomatoesthe dollar depreciates the peso appreciates The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  14. 7. American investors feel the Mexican economy will grow The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  15. 7. American investors feel the Mexican economy will growthe dollar depreciatesthe peso appreciates The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  16. 8. American investors feel the Mexican economy is unstable The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  17. 8. American investors feel the Mexican economy is unstablethe dollar appreciates the peso depreciates The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  18. 9. Mexican demand for US guns increases The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  19. 9. Mexican demand for US guns increasesthe dollar appreciates the peso depreciates The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  20. 10. American demand for cocaine shipped through Mexico increases The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  21. 10. American demand for cocaine shipped through Mexico increasesthe dollar depreciates the peso appreciates The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  22. 11. The US imposes a tariff on Mexican goods The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

  23. 11. The US imposes a tariff on Mexican goodsthe dollar appreciates the peso depreciates The Market for Dollars The Market for Pesos S S Dollar / Pesos exchange rate Peso / dollar exchange rate D D Quantity of Dollars Quantity of Pesos

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