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True or False? Explain!   “A depreciation of the USD against the euro makes euro deposits less...

True or False? Explain!   “A depreciation of the USD against the euro makes euro deposits less attractive relative to dollar deposits, while an appreciation of the USD makes euro deposits more attractive." Under what conditions your answer would change?

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Answer #1

This statement is true

A weaker United States dollar implies that the current dollar costs of Euro deposit is increased and this makes the euro less attractive for depositors. Similarly if there is an appreciation of the US dollar then it will make the euro deposits more attractive. Conditions in which the answer might change include future expected depreciation of US dollar in case it is currently strong and expected appreciation in case it is currently weak relatively

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