Which of the following explains the rise of the dollar against most major currencies in the late 1990s,even though the United States was still running a significant balance-of-payments deficit?
A)reduced government intervention in the foreign exchange market
B)increased foreign investments in U.S.financial assets
C)low real interest rates in the United States compared to the rest of the world
D)increased exports as opposed to imports
E)increased communism in the United States

Question

Quizplus · Accepted Answer

Increased foreign investments in U.S. financial assets created a demand for dollars, which in turn raised the value of the dollar against most major currencies. This occurred despite the balance-of-payments deficit because foreign investors were attracted to the relative stability of the U.S. economy and its financial markets. The increased demand for U.S. financial assets led to a higher value of the dollar.

Which of the Following Explains the Rise of the Dollar