Web Links

• p. 804: Go to http://www.bea.gov/bea/di1.htm for the latest U.S. balance of payments data from the Bureau of Economic Analysis.
• p. 808: Go to http://research.stlouisfed.org/fred2/categories/15 for recent data from the Federal Reserve Bank of St. Louis on the exchange value of the U.S. dollar relative to the major currencies of the world.

Issues and Applications Web Resources:

• To read about the Bank of Japan’s own perspective on its numerous foreign exchange interventions over the years, go to http://www.boj.or.jp/en/about/basic/etc/faqkainy.htm.
• Go to http://www.ny.frb.org/aboutthefed/fedpoint/fed44.html to learn more about U.S. interventions in foreign exchange markets from the Federal Reserve Bank of New York.

Daily Exchange Rates
It is an easy matter to keep up with changes in exchange rates every day using the Web site of the Federal Reserve Bank of New York. In this application, you will learn how hard it is to predict exchange rate movements, and you will get some practice thinking about what factors can cause exchange rates to change.

     Title: The Federal Reserve Bank of New York: Foreign Exchange 12 Noon Rates

     Navigation: Go to http://www.newyorkfed.org/markets/fxrates/noon.cfm to visit the Federal Reserve Bank of New York's Statistics home page for Foreign Exchange 12 Noon Rates.

Application
Answer the following questions.

1. For each currency listed, how many dollars does it take to purchase a unit of the currency in the spot foreign exchange market?

2. For each day during a given week (or month), choose a currency from those listed and keep track of its value relative to the dollar. Based on your tabulations, try to predict the value of the currency at the end of the week following your data collections. Use any information you may have, or just do your best without any additional information. How far off did your prediction turn out to be?