Textbook Problem

Foreign Exchange Transactions Assume the country of Neeland has stable and predictable international trade flows with the United States. Neeland periodically makes the news because its government might have problems repaying its debt owed to local banks. The value of its currency (the nee") commonly declines on one day, but then jumps back up a few days later. Thus the value of the nee exhibits much volatility. Briefly explain what types of transactions are likely causing the shifts in demand for the nee and supply of the nee for sale in the foreign exchange market.