Weighing the Influence of Factors on Exchange Rates The New Zealand dollar’s spot rate was equal to $0.60 last month. New Zealand conducts much international trade with the United States, but the financial (investment) transactions between the two countries are negligible. Assume the following conditions have occurred in the last year. First, interest rates increased in New Zealand but decreased in the United States. Second, inflation increased in New Zealand but decreased in the United States. Third, the New Zealand central bank intervened in the foreign exchange market by exchanging a very small amount of U.S. dollars to purchase a very small amount of New Zealand dollars. How should the New Zealand dollar change over the year based on the information provided here?
International Financial Management
International Financial Management
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Weighing the Influence of Factors on Exchange Rates The New Zealand dollar’s spot rate was equal to $0.60 last month. New Zealand conducts much international trade with the United States, but the financial (investment) transactions between the two countries are negligible. Assume the following conditions have occurred in the last year. First, interest rates increased in New Zealand but decreased in the United States. Second, inflation increased in New Zealand but decreased in the United States. Third, the New Zealand central bank intervened in the foreign exchange market by exchanging a very small amount of U.S. dollars to purchase a very small amount of New Zealand dollars. How should the New Zealand dollar change over the year based on the information provided here?
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