Relative to the yen, from 2012-2014 the U.S. dollar
A) depreciated due to an anticipated decrease in the interest rate differential and expectations of a lower future exchange rate.
B) appreciated due to an anticipated decrease in the interest rate differential and expectations of a lower future exchange rate.
C) depreciated due to an anticipated increase in the interest rate differential and expectations of a higher future exchange rate.
D) appreciated due to an anticipated increase in the interest rate differential and expectations of a higher future exchange rate.

Question

Quizplus · Accepted Answer

From 2012 to 2014, the U.S. dollar appreciated relative to the yen, largely because of an anticipated increase in the interest rate differential between the U.S. and Japan, which made dollar-denominated assets more attractive, and expectations of a higher future exchange rate. This anticipation encouraged investors to hold assets in dollars rather than yen, increasing the value of the dollar relative to the yen.

Relative to the Yen, from 2012-2014 the U