Yesterday, the Australian dollar was trading in the foreign exchange market at 80 cents per U.S. dollar. Today, the Australian dollar is trading at 90 cents per U.S. dollar. The dollar has ________ and a possible reason for the change is ________ in the expected future exchange rate.

Question

Quizplus · Accepted Answer

The Australian dollar has appreciated because it now costs more U.S. dollars to buy one Australian dollar (from 80 cents to 90 cents). A possible reason for this change is an increase in the expected future exchange rate, meaning investors believe the Australian dollar will be stronger in the future, increasing demand for it now.

Yesterday, the Australian Dollar Was Trading in the Foreign Exchange