If Australian demand for Japanese steel decreases, then in the FX market: 1. the demand for...
If Australian demand for Japanese steel decreases, then in the FX market:
1. the demand for yen increases and the Australian dollar appreciates against the yen.
2. there is no change in the demand for yen.
3. the demand for yen decreases and the Australian dollar appreciates against the yen.
4. the demand for yen decreases and the Australian dollar depreciates against the yen.
5. the demand for yen increases and the Australian dollar depreciates against the yen.
Homework Answers
Australian demand for Japanese steel decreases.
This decrease in demand for Japanese steel by Australian will also reduce the demand for yen by Australians to pay for such imports.
As demand for yen will decrease, the exchange rate between two (Australian dollar per yen) will also decrease.
This means now fewer Australian dollar would now be available per yen.
This means Australian dollar has appreciated while yen has depreciated.
Hence, the correct answer is the option (3).
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