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Assignment #3 Have a look at the exchange rate history of Germany. Is there a pattern of movement over the last 6 months to a
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Answer #1

In the last six months, the exchange rate of Germany has faced he fluctuations and it feel lowest in the month of November to $1.0980. This situation is indirectly responsible to impose threat like sluggish growth in the Eurozone.

The major reason behind the situation is the poor performance of the Industrial sector of Germany.

Issues related to the determination of exchanre rate

Changes in market inflation rate:

Changes in currency exchange rate are connected with the changes in market inflation rate. It can be easily understand the following example. Country will lower inflation rate experience rowth of prices of products but at a slower rate. On the contrary, slower rate of inflation is responsible to increase the price of products which deteriorated the price determination process.

Unstable political situation

It is also one of the crucial issues behind the determination of exchange rate. This situation is responsible to create volatility in the demand and supply of currency section that indirectly responsible to deteriorate the price determination process.

Apart from the above mentioned points, deficit in balance of trade, government debt are also pivotal issue behind the situation

In the last six months, the exchange rate of Germany has faced he fluctuations and it feel lowest in the month of November to $1.0980. This situation is indirectly responsible to impose threat like sluggish growth in the Eurozone.

The major reason behind the situation is the poor performance of the Industrial sector of Germany.

Issues related to the determination of exchanre rate

Changes in market inflation rate:

Changes in currency exchange rate are connected with the changes in market inflation rate. It can be easily understand the following example. Country will lower inflation rate experience rowth of prices of products but at a slower rate. On the contrary, slower rate of inflation is responsible to increase the price of products which deteriorated the price determination process.

Unstable political situation

It is also one of the crucial issues behind the determination of exchange rate. This situation is responsible to create volatility in the demand and supply of currency section that indirectly responsible to deteriorate the price determination process.

Apart from the above mentioned points, deficit in balance of trade, government debt are also pivotal issue behind the situation

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