Exchange Rates Impact Analysis
Exchange Rates Impact Analysis
(Exchange Rates Impact Analysis)
This week, we have addressed how differences between exchange rates can affect the cost or profitability of a transaction. The following exercise is designed to reinforce your understanding of this process and how currency exchange rates affect the price of goods bought or sold in another country.
Review the International Exchange Rate Conversions Presentation from Wisc-Online and Current Exchange Rates from X-Rates. Plot a graph of the American Dollar versus the Euro over the past year (or 120 days) and answer the following questions:
- What has happened to the US Dollar versus the Euro over this period?
- What has been the effect on foreign imports into the United States?
- What has been the effect on US exports.
Step 1: Plot the Exchange Rate Graph
- Gather Data:
- Use X-Rates to access historical exchange rates for USD to EUR over the past year or 120 days. Export the data in a format that can be used (e.g., CSV or manual entry into Excel).
- Alternatively, download the data directly if available.
- Create the Graph:
- Open Microsoft Excel or another graphing tool.
- Input the date in one column and the corresponding exchange rate (USD to EUR) in another column.
- Highlight the data and create a line graph to visualize how the USD/EUR exchange rate has changed over the period.
Step 2: Analyze the Data and Answer Questions
- What has happened to the US Dollar versus the Euro over this period?
- Observe trends in the graph. Has the USD appreciated (value increased) or depreciated (value decreased) relative to the Euro? Mention significant fluctuations and potential reasons (e.g., economic policies, global events).
- What has been the effect on foreign imports into the United States?
- If the USD appreciates, imports from the Eurozone become cheaper for American consumers, leading to increased imports.
- If the USD depreciates, imports become more expensive, reducing demand.
- What has been the effect on US exports?
- If the USD appreciates, American goods become more expensive for Eurozone buyers, likely reducing exports.
- If the USD depreciates, American goods become cheaper and more competitive, increasing exports.
Step 3: Compile and Submit
- Microsoft Word Document:
- Include the graph as an embedded image.
- Add the written responses to the questions under the graph.
- Microsoft Excel Spreadsheet:
- Include the raw data and the graph on separate or the same sheet.
- Save and name your file appropriately (e.g., “USD_EUR_Exchange_Rate_Analysis”).
- Final Submission:
- Ensure the document/spreadsheet is clearly formatted with your name, course title, and date.
- Submit the file(s) via your course’s submission platform.
