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The dollar fell versus the Euro and Yen
Normalized exchange rate refers to the current exchange rate divided by the exchange rate against the US dollar in the base year, which effectively scales up the exchange rate of a "small value" currency like the Japanese yen, worth a small fraction of a dollar, and scales down the exchange rate of a "big value" currency like the British pound ...
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The effect estimates future exchange rates based on the relationship between nominal interest rates. Multiplying the current spot exchange rate by the nominal annual U.S. interest rate and dividing by the nominal annual U.K. interest rate yields the estimate of the spot exchange rate 12 months from now:
Obstfeld and Rogoff (2000) identified the purchasing power and exchange rate disconnect puzzle as one of the six major puzzles in international economics. [4] These were the consumption correlation puzzle, home bias in trade puzzle, the equity home bias puzzle, the Feldstein-Horioka savings-investment correlations puzzle, and the exchange rate regime puzzle.
The Fed could begin to taper. For premium support please call: 800-290-4726 more ways to reach us
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