Exchange Rate Theories

Paper Summary:

This paper discusses the fluctuations of the U.S. dollar exchange rate and exchange rate theories in the past five years. The paper suggests reasons for these fluctuations and the advantages and disadvantages of this to foreign investors. It also suggests reasons that the U.S. dollar did not plummet, as could have been expected, after certain national disasters of the past five years.

From the Paper:

"Exchange Rate Theories and the U.S. Dollar Exchange rates of the United Sates dollar are currently high due to the fact that foreign investors are purchasing more American money than was previously believed possible. Hurricane Katrina, as well of the terrorist bombings of September 11th, 2001, made many within financial markets believe that the exchange rate of the dollar would plummet due to U.S. domestic problems. However, the current exchange rate is the highest it has been in years, with foreign investment firms continually buying dollars to pay for goods. It is also evident that foreign investors are purchasing U.S. goods more rapidly than in previous years, also a contradiction to what financial experts believed was possible after 9/11. The disastrous events did, however create a period of time in each case in which the U.S. dollar dropped significantly in value, and goods were slow to move into the market."

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