If the central banks of the world chose to diversify their foreign-exchange reserves away from the dollar and into the euro,
A)this would have the result of a strengthening of the value of the dollar.
B)this have the result of a weakening in the value of the dollar.
C)this would not have much impact,as the information would be lost in the day-to-day volatility of exchange rates.
D)none of the options

Question

Quizplus · Accepted Answer

If central banks choose to diversify their foreign-exchange reserves away from the dollar and into the euro, it means they will sell their dollars and buy euros. This increase in supply of dollars in the foreign-exchange market and the decrease in demand for dollars could lead to a weakening of the value of the dollar relative to the euro. Therefore, option B is the best choice.

If the Central Banks of the World Chose to Diversify