Relative to the yen,from 2005-2007 the U.S.dollar

Question

Quizplus · Accepted Answer

When the interest rate differential between two countries widens, it generally strengthens the currency of the country with the higher interest rate. From 2005-2007, the U.S. Federal Reserve was gradually raising interest rates, which increased the interest rate differential between the U.S. and Japan. This made the U.S. dollar more attractive to investors, causing it to appreciate relative to the yen. Additionally, expectations of a higher future exchange rate may have led to increased demand for the dollar, further contributing to its appreciation. Therefore, choice A is the best answer.

Relative to the Yen,from 2005-2007 the U.S.dollar